Do not pay illegal, excess VAT, warn housing activists

With the builders set to recover value-added tax (VAT) from buyers who purchased under-construction properties between June 20, 2006, and March 31, 2010, housing activists and experts contend that there is no need for panic and payments should be made after checking relevant documents.

With the builders set to recover value-added tax (VAT) from buyers who purchased under-construction properties between June 20, 2006, and March 31, 2010, housing activists and experts contend that there is no need for panic and payments should be made after checking relevant documents.

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In a meeting on Wednesday, state cabinet ministers discussed the high court's decision on VAT, saying builders should pay the tax, and indicated there would be no amnesty.

It was also decided that a group of ministers would be set up, if required, to work out any anomalies in implementing the decision and to ensure that buyers are not harassed.

Activists say VAT should be paid only if it is specified in the sale agreement and does not exceed 3% of the apartment value. It excludes land and labour costs, and is to be paid only on the materials used in construction.

Some say the tax should not be passed onto buyers. “When consumers pay for apartments it covers the land cost as well other expenses like construction materials and labour. How can the consumer bear taxes separately for these,” asked advocate Vinod Sampat.

Similar is the contention of Ramesh Prabhu, chairman, Maharashtra Societies Welfare Association (MSWA), who said that agreements should be checked before making payments.

“The consumers should pay only if specified in the sale agreement,” said Prabhu. “There is no need for any interest to be paid,” he added.

Consumers complain of lack of clarity as builders are charging a flat 5% of the total value of the apartment.

“There is no transparency, and no clarification,” said Anil Mishra, a resident of Malad. Mishra was slapped with a VAT bill of Rs 2 lakh by the builder.

“There is no logic in paying VAT as we have cleared all our dues and got the possession,” he added. Sampat cautioned it is mandatory for builders to provide a detailed break-up of cost of materials used in construction.

Meanwhile, the sales tax department said it will now act against builders who have not cleared their VAT dues.

“They will have to pay penalty as well as interest,” said a senior sales tax official.

He said notices will be issued, and properties will be attached in case of non-compliance. The department will also inquire into cases where the builders have recovered excess VAT or illegally charged the tax to buyers.