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IREF® - Indian Real Estate Forum > Real Estate in India > Real Estate Pune > Is Value added Tax is applicable on purchase of new flat
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Old July 1 2009, 11:49 AM   #1
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Default Is Value added Tax is applicable on purchase of new flat

Hi All,

We have purchased a flat at Kumar Sansar Kondhwa.

Now that we have paid all the money , Kumar Builder is not giving us the possesion.

kumar builder is asking for a cheque for VAT which he says has come in existence from June 20th 2006.

Although he is not sure, he says its will be 5% of the agreement value. So demanding a blank cheque (Ridiculous)

Does any1 know about it, please confirm ? has anyone paid it?

thanks in advance.

 
Old July 1 2009, 12:59 PM   #2
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Quote:
Originally Posted by kanchan_sa View Post
Hi All,

We have purchased a flat at Kumar Sansar Kondhwa.

Now that we have paid all the money , Kumar Builder is not giving us the possesion.

kumar builder is asking for a cheque for VAT which he says has come in existence from June 20th 2006.

Although he is not sure, he says its will be 5% of the agreement value. So demanding a blank cheque (Ridiculous)

Does any1 know about it, please confirm ? has anyone paid it?

thanks in advance.
This is ridiculous. Lodge a complaint with PBAP/Credai Pune. If they don't listen, file a case in consumer court under cheating as well as MOFA.
It would be better if you can file a case under-some association say Kumar Sansar Residents Association.
 
Old July 1 2009, 01:41 PM   #3
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Quote:
Originally Posted by kanchan_sa View Post
Hi All,

We have purchased a flat at Kumar Sansar Kondhwa.

Now that we have paid all the money , Kumar Builder is not giving us the possesion.

kumar builder is asking for a cheque for VAT which he says has come in existence from June 20th 2006.

Although he is not sure, he says its will be 5% of the agreement value. So demanding a blank cheque (Ridiculous)

Does any1 know about it, please confirm ? has anyone paid it?

thanks in advance.
Do not let your hard earned money go away so easily.. it the law is existing from 2006 he should have told you earlier.. also other builders are not charging the same.. why is he a special case.. it seems he is bullying people to cover up for his own losses.. contact other people who have bought houses in your socitey file a case as a group in consumer court and send him a notice.. also tell him his misdeeds will be splashed all over the Internet cautioning people not to buy from him... you can tell him that we can make PPTs with his misdeeds and send it to a lot of places..
Enough of builder monopoly now..
 
Old July 1 2009, 02:45 PM   #4
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VAT
======
VAT is sales tax on "Works Contract" which is "agreement for sale" between builder and buyer. In which case, buyer agrees to book a flat while apt/project is under construction.

As per below information VAT is only to be charged on the flat which is booked while it is under construction via "agreement for sale", which on the lines of above is construed as "Works Contract", which attracts sales tax which is called VAT.


akssenti:
So in this case, if you have booked flat "ready possession", then he has to figure out, whether VAT is applicable. as per above mentioned refs, it seems that VAT may NOT be applicable.

Though PBAP claims (see link below) that, builder associated with it will not charge VAT, experience that buyer has is to the contrary that claim.

]http://www.sakaaltimes.com/2008/12/09010257/Builders-force-buyers-to-pay-V.html[/url]

Also pls ensure that, 5% is the correct figure at which VAT is charged. For example some states have it 4%. Not sure what is that in Maharashtra.

Service Tax
===========
Recent notification by "Central Board of Excise and Customs", on Janaury 29, 2009 has sought to abolish service tax, on "agreement of sale" kind of transaction.

Official notification for the above:
]http://www.servicetax.gov.in/circular/st-circular09/st-circ-108-2k9.htm[/url]

So from above builder for sure can not charge service tax.

In any case, I do not believe that charging VAT, tantamounts to cheating/illegal etc. It is just these facts are usually not known to the buyer as while booking we are most interested about other details of the flat. Whether builder should charge, VAT now, if there is no clarity on it is a matter to be negotiated with the builder/PBAP etc


HTH



Disclaimer: I am still trying to figure out some more details on VAT/Service Tax. I quote whatever could I understand so far. Pls verify information above. Would like to hear from knowledgeable person if anything is incorrect/missed.
 
Old July 1 2009, 04:27 PM   #5
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There was some news regarding such a law coming into place, but I guess its not imposed yet. Tell the builder to show you the government notice which says that it is mandatory to pay VAT. Unless you see some government document which mentions this, do not pay anything to the builder. Giving a blank cheque is out of question.
 
Old July 1 2009, 05:12 PM   #6
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This has been discussed on this forum. It is not VAT but service Tax which maharashtra government has applied from 2006 and it allows builders to collect service tax of around 4.12% of agreement cost from buyers. Builders has taken stay from high court on this and so they collect cheque without any date as precausion.
Askenti, GK must have collected it from you as it is always mentioned on their cost sheet.
Latest news on this is that finance ministry has taken decision not to apply this tax as buyers are paying stamp duty and it is immovable property. But case is pending in court so no further decison taken.
 
Old July 1 2009, 06:10 PM   #7
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Maharashtra State Govt. has made amendment into MVAT 2002 act, in 2006.
]http://www.mahavat.gov.in/mahavat/circular/upload/00016-00217.html[/URL]

As per the link below MVAT 2006 stands amended and the amendment is a part of law. Separate trade circular is issued to clarify things in details.

Ordinance was issued vide "Circular
No. VI of 2006 dt. 20th June,2006" to bring the "Works Contract" under the purview of MVAT. Subsequently this ordinance is converted into an Act by Act No XXXII of 2006 with effect from 5th August, 2006.

On 07/02/2007 one more circular was issued to clarify MVAT Act amendment made in August 2006 with repsect to applicability of VAT on transfer of property.



Below is the link for that

http://www.mahavat.gov.in/mahavat/circular/upload/00016-00207.html


so IMO it is NOT service tax but VAT that is being charged. And moreover service tax is NOT charged by State Governments. Service taxes come under the purview of "Central Board of Excise and Customes", Govt of India, if I am correct.


Also

It is clearly mentioned in the above mentioned circular, that if



" if the agreement is entered into after the flat or unit is already constructed, then there would be no works contract, but so long as agreement is entered into before the construction is complete, it would be a Works Contract"


From above it can be infered that, if flat is purchased ready to occupy, then VAT need NOT be paid.

I am not sure how to ascetain "Construction is complete" on paper which will stand the test of this law, using which I can avoid having to pay VAT. Experts pls comment


HTH,
Sameer

 
Old July 1 2009, 07:05 PM   #8
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I have seen it in GK cost sheet around 8 months back. It was at the bottom with * marked. Also it was mentioned in my friend's agreement that service tax if applicable need to be paid by buyer.
If it is not there then might be removed afterwords as it looks like it will get exempted.
 
Old July 1 2009, 07:12 PM   #9
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Quote:
Originally Posted by mahesh pune View Post
I have seen it in GK cost sheet around 8 months back. It was at the bottom with * marked. Also it was mentioned in my friend's agreement that service tax if applicable need to be paid by buyer.
If it is not there then might be removed afterwords as it looks like it will get exempted.
Yeah just check it up.. *** is there all right if an issue i am sure GK will also bring it up during possesion time.. praying it does not happen..

Builder did not mention it when i went to check about payment for MSEB and socitey mainatinance.

Hoping for best.. will fight till my last breath..
 
Old July 1 2009, 07:20 PM   #10
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I already checked with GK before I decided not to book the flat in the RV Palace. They will indeed collect a blank cheque from you before handing over the keys. This recently happend for one of my freinds who was ready to get the keys at SunCrest.

The salesman said they have more than two hundred blank cheques from folks who have booked at Roseland. But I don't want to be as dump as those two hundred ones.

Anyways this was not the only reason for my not booking the flat here.
 
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