MUMBAI:
Thousands of people who bought flats between 2006 and 2010 will have to
pay value added tax (VAT) at the rate of 5% of the value with
retrospective effect.
On August 6, the state's sales tax department issued a circular to developers saying VAT would be levied on flats, shops and bungalows sold by them between June 20, 2006 and March 31, 2010 .
...
Several Mumbai-based developers said they would soon send VAT collection notices to such flat purchasers.
The new burden on a customer who bought a flat at Rs 50 lakh works out to a minimum of Rs 2.5 lakh.
The government intends to collect around Rs 1,000 crore for this four-year period.
The Bombay high court recently rejected real estate developers' appeal against the tax. MCHI-CREDAI and CREDAI-Pune Metro, which represented the developers, have now moved the Supreme Court with a special leave petition.
Atul Puranik of the Centre for Fair Business Practices, said: "The cost of living is going up every day. The 5% VAT plus penal interest will further cripple the common man. We appeal to the government to scrap VAT on sale of flats altogether and give much-needed relief to the customer.''
The Maharashtra government had imposed 5% VAT on flat sales following the order of the Supreme Court in the case of K Raheja versus Karnataka government. Property experts said this led to an anomaly as the taxation system followed in Karnataka is totally different from the one prevailing in Maharashtra. "Unlike Maharashtra, Karnataka does not have the 'Ownership of Flat Act' and therefore developers in that state prepare two separate sets of documents—one for the share of land on which stamp duty is levied and another on construction on which no stamp duty is paid,'' they said.
The Maharashtra government subsequently reduced VAT on sale of flats to 1% from April 1, 2010. The government, however, is now levying 5% on the flats bought between 2006 and 2010, putting thousands of buyers into a fresh financial spot.
MCHI-CREDAI said each flat buyer in Maharashtra will have to pay up to 5% additional taxes for flat purchased by them along with interest at 15% per annum and penal interest at 25% that the state government is levying. Flat buyers are already reeling under the pressure of 3.09% service tax which has been implemented by the central government.
On August 6, the state's sales tax department issued a circular to developers saying VAT would be levied on flats, shops and bungalows sold by them between June 20, 2006 and March 31, 2010 .
...
Several Mumbai-based developers said they would soon send VAT collection notices to such flat purchasers.
The new burden on a customer who bought a flat at Rs 50 lakh works out to a minimum of Rs 2.5 lakh.
The government intends to collect around Rs 1,000 crore for this four-year period.
The Bombay high court recently rejected real estate developers' appeal against the tax. MCHI-CREDAI and CREDAI-Pune Metro, which represented the developers, have now moved the Supreme Court with a special leave petition.
Atul Puranik of the Centre for Fair Business Practices, said: "The cost of living is going up every day. The 5% VAT plus penal interest will further cripple the common man. We appeal to the government to scrap VAT on sale of flats altogether and give much-needed relief to the customer.''
The Maharashtra government had imposed 5% VAT on flat sales following the order of the Supreme Court in the case of K Raheja versus Karnataka government. Property experts said this led to an anomaly as the taxation system followed in Karnataka is totally different from the one prevailing in Maharashtra. "Unlike Maharashtra, Karnataka does not have the 'Ownership of Flat Act' and therefore developers in that state prepare two separate sets of documents—one for the share of land on which stamp duty is levied and another on construction on which no stamp duty is paid,'' they said.
The Maharashtra government subsequently reduced VAT on sale of flats to 1% from April 1, 2010. The government, however, is now levying 5% on the flats bought between 2006 and 2010, putting thousands of buyers into a fresh financial spot.
MCHI-CREDAI said each flat buyer in Maharashtra will have to pay up to 5% additional taxes for flat purchased by them along with interest at 15% per annum and penal interest at 25% that the state government is levying. Flat buyers are already reeling under the pressure of 3.09% service tax which has been implemented by the central government.
--
VIjay Tanna
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