VAT from Nov 1 on sale of homes October, 31st 2015
With
the government notifying the long overdue decision to charge value
added tax (VAT) from builders for the sale of an apartment, any hopes of
housing becoming cheaper appear to have faded,
as the costs will be
passed on to the buyer.
From November
1, builders and real estate developers will have to pay VAT on all
repair and sale of apartments, homes and villas.
The
proposal was cleared on October 26, making it mandatory for developers
to pay the tax in a lump sum based on fixed slabs once the sale
agreement has been signed.
Builders
feel the move will impact the recovery in the real estate sector which
is already struggling to pick up in the state. Real estate developers
are therefore likely to meet the commissioner for commercial taxes next
week to clarify certain "ambiguous" aspects of the notification.
"In today's market this VAT will have an impact. It is the end-user who will have to pay," a builder told TOI.
Agreements
for carrying out the work of building, construction, manufacture,
processing, fabrication, erection, installation, fitting, improvement,
modification, repair or commissioning of any movable or immovable
property will also come under the ambit of this notification, the state
government has stated.
"This (VAT) was promised by then
chief minister (present defence minister) Manohar Parrikar. It was left
hanging for so long, so we finally requested the government to pass it
rather than leave us hanging," said CREDAI president Jaganath 'Desh'
Prabhudesai.
Builders, real estate
developers and all parties that are liable under the amended definition
of sale are required to get registered by November 30, failing which the
government will impose penalties.
If the aim of the
government is to restrict large-scale construction of apartments/villas
that would affect the environment, it should then impose an incremental
VAT on high-value housing rather than all constructions. The poor always
find it difficult to buy a home. The government could attempt to earn
revenue from houses priced above Rs 1 crore. The proposed VAT structure
also leaves a loophole for the builder and the buyer to connive with the
tax implementers to keep the cost of the new home to up to Rs 20 lakh,
where the VAT is nil.