VAT on property sale: SC extends recovery deadline
In a minor respite for home buyers, the Supreme Court on Tuesday extended the deadline to pay Value Added Tax (VAT), after an association of builders from the state appealed against the state move to impose the 5% tax on sale of flats.
The court however refused to stay the recovery of the tax, as demanded by builders.
A division bench of justice RM Lodha, justice AR Dave and justice Ranjan Gogoi passed an interim order extending the deadline for developers in Maharashtra for paying VAT by two months, to October 31. The court was hearing a Special Leave Petition (SLP) filed by MCHI-CREDAI.
The organisation, which represents developers in the state, had moved the apex court after the Bombay high court order dismissed its plea opposing the state government's decision to impose the VAT.
The order brings bad news for home buyers as they will have to pay the VAT if developers pass the burden of the tax on to them. However, the only respite is that they have two more months to pay it.
Opposing the tax, housing activists blamed the government for burdening homebuyers. "The only respite for a flat buyer is the extension of the last date of payment. If consumers have to pay a huge amount for no fault of theirs, they will stop having faith in the government," said Vinod Sampat, a lawyer.
Government sources pointed out that there was no stay on the tax and hence the recovery would continue. "If builders don't pay the tax until the due date then the state is free to take legal action against developers," the sources said.
"This is unjustified as it is the buyer who will have to ultimately surrender to the developers' demand if they want their flat." Ramesh Prabhu, chairman, Maharashtra Societies Welfare Association (MSWA) which has written to chief minister Prithviraj Chavan, and deputy chief minister Ajit Pawar over the issue.
Meanwhile, developers said that they would continue to recover the tax from buyers. "We are going to claim the money from customers as per the calculation. For people who have already got possession of the flat, it is between the buyers and the developer how they deal with it," said Paras Gundecha, president, Maharashtra Chambers of Housing Industry.
A Rustomjee Group spokespeson said that most developers have a clause in the agreement that the taxes have to borne by the customers, as developers are merely collecting the indirect tax from them and depositing it with the government.
This has meant more woes for flat buyer, who have already invested huge amounts in purchasing homes. "My flat cost me Rs 2 crore and the builder wants me to pay Rs 10 lakh as VAT. I am a law-abiding citizen and don't want to waste time fighting court case against the builder. This is unfair and it has left me in financial distress," said a flat buyer, who bought a flat in Wadala in 2007.