5% Vat to be levied on flats bought between 2006 & 2010

The Maharashtra Govt has decided to collect VAT (Value added tax) from home owners who bought their under-construction homes directly from builders between June 2006 and March 2010.The value of VAT has been decided as 5% of the total agreement value.This amount will have to be paid before August 31st.
Eg:A buyer who bought a flat worth 2 crores from a builder between June 2006 and March 2010,will now have to pay 10 lakhs as tax before 31st August 2012.

This tax is not valid for resold apartments (flats bought from a previous owner).

Flats sold after April 2010  will be charged only 1% VAT and 3.75% Service Tax.There is No Service Tax or VAT levied on completed projects with OC (Occupancy Certificate).Flats with more than 2000 sq ft or 1 crore price will be charged 4.5% Service tax along with 1% VAT.

Maximum amount of flats were sold between 2006 and 2010,when prices were at an all time high.Builders have been assigned the task to collect the money from the buyers. Failure to do so will invite penalty.
A sales tax officer said that during the recent raids on builders,it was noticed that the builders had collected this money from the buyers but had not deposited it with the sales tax dept.
The department expects to collect 800-900 crores by this.

Further clarifications on VAT on flat purchase:
VAT is liable on the total cost of construction of a flat or the agreement value,whichever is lower.So basically,if you purchased a 1000 sq ft flat and the construction cost is 1200 per sq ft,then the VAT you have to pay is 5% of Rs 12,00,000 i.e. Rs 60,000.

There is a further update on VAT on house purchases.
The govt is in consultation with various depts to come to a conclusion regarding the formula for calculating the VAT.Before any decision is arrived at,the builders should not harass buyers into coughing up 5% vat.In absence of any conclusion by the committee,the developers can charge between 0.5% and 3% VAT if at all necessary.

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  1. namdeo says

    What happens if buyers not responds to builders as they not inform us about the vat

    1. Sky Properties says

      Builders are liable.They cannot force the buyer to pay if it was not mentioned in sale agreeement.

  2. Eddie Van Halen says

    The building that I lived in was old and dilapidated.  We are part owners of the property. We went in for redevelopment. The builder had agreed to give us “double our carpet area” in lieu of our rights in the land.  Accordingly the stamp-duty was paid and an Agreement to this effect was signed at the end of December 2010. However it was not registered as the Builder had not got the C.C for the construction of our floor. Now that the building is nearing completion we want to register the said Agreement. I want to know if VAT has to be paid when we go to register the Agreement??? And if it is applicable then why is it applicable because we are NOT buyers.

    1. Sky Properties says

      You have to register an agreement within 6 months.In your case more than 1 year has passed,thereby making the agreement invalid.You will have to prepare a new document.If you register a new agreement the builder will have to pay VAT of 1% either on the agreement value or the cost of construction (whichever is lower).Builder will collect this from you and pay to the govt.He has to register himself first and get a VAT number from the Sales tax dept.Once he gets this number,he is liable to pay VAT after collecting from you and issuing you a reciept for the same.

  3. harried buyer says

    Hi,
    I bought 2 properties – under construction in the period 2006 -2010. the agreement with builder has a clause all govt levies & taxes shall be borne by the buyer but at the time of buying the home, the builder did not disclose about 5% VAT. now the builder has given notice to pay 5% of full agreement value. even though he never mentioned it, he says we have signed the agreement to pay all govt taxes, so it is liable. Do we have to pay or cn we refuse? we have taken possession of both flats. what can the builder do in this case?

    1. Sky Properties says

      You have to pay if you signed the agreement saying so.You can refuse but he will take you to court and most probably you will lose the case.So better option is to pay.

  4. rajat says

    Hi,
    Does 5% vat applicable if someone had purchased flat say in 2007 from builder and sold it to another person say in 2009.
    If yes to whom it will be applicable?

    1. Sky Properties says

      Yes,you will be liable to pay be liable to pay the VAT to the builder.

    1. Prashant B says

      Hi,
      thank you for response.

      Many of my friend, Me and other people over the internet has this questions about resale property.

      Just explaining it so other may get information from this.

      If person “A” bought the flat after JUN 2010 from owner not from the developer or builder.
      (expecting flat bought by first owner between 2006 * Mar 2010)

      Even owner/builder didn’t pay VAT, second owner is not resposible for paying 5% VAt. It’s the owner or the builder responsibility not the second owner responsibility. (Except mention in Agreement).

      Please reply to above of my understanding so this will help others who were confuse like me.

      1. Sky Properties says

        First owner is responsible for vat.If first owner has sold the flat and gone away,its the builder’s liability.

  5. Jigar says

    HI,

    I bought a RESALE flat at PUNE Magarpatta City in JULY-2012.

    I received a notice for VAT from the builder.

    Will I have to pay VAT OR first owner has to pay?

    Thanks in advance….

      1. RM says

        Hi Sky Prperties,

        How the builder will catch hold the first buyer?

        If the builder is asking the resale second owner then who should ask the first buyer to pay: the builder or second owner.

        If first owner will not pay to builder then what is the option for the builder?

        Do the builder has any right not to issue the OC to second owner?

        Your reply will be highly appreciated as i have also a similar case the first owner bought the under construction flat before 2010 and registered it. I bought it in December 2010 and took possession in Feb 2011. Thanks.

        1. Sky Properties says

          Builder has no right to come after you.Only the first buyer is liable.Its the builder’s responsibility how he gets the money.

  6. Venky says

    Ok, i went through some of the Q&A and some are confusing. This is my situation.
    Flat Purchased in Navi Mumbai from Developer in Nov2006, Agreement has clause that Purchaser is liable to pay any changes in taxes or other levies. I sold the Flat in 2009. Its been three years since i sold the flat, and i now receive a notice from the Developer for 5% VAT. Am i liable to pay this?

    1. Sky Properties says

      Yes,technically you are liable…but there is some confusion in latest developments.Now there are rumours that builder cannot take this amount from buyers.He will have to pay himself.
      Only god knows what is going on in this country.

  7. sanjeev says

    I bought resale flat in 2008 for about 25Lacs while the first buyer purchased it in 10Lacs only.. so my question is, VAT will be applied on 10Lac or 25 Lac and who will be pay ist buyer who bought from builder or 2nd buyer.
    Thanks

  8. Debabrata says

    Dear Sir,
    I have purchased a flat in Nagpur in the year (agreement in 2008, Sale deed in Mar 2009). Now builder send a notice for 5% VAT to be paid by me. In sale deed there was a point written :
    “That in case of any sale tax,tax on works contract,turn over tax,service tax or any other tax levied by the state/central govt./local bodies or any other authority on construction or sale activity, the PURCHASER shall pay the same as may be levied on the said premises. So also any additional tax,charge or demand is levied by any administrative authorities subsequent to the execution of this instrument directly pertaining to the construction or sale of apartment shall be the liability and responsibility of the PURCHASER to pay the same”.

    Builder’s advocate send a notice to pay the VAT 5% through the builder/developer within 15.10.12.

    Please advise IS IT PAYABLE BY THE BUILDER OR PURCHASER ? IF DENIED BY THE PURCHASER WHAT CAN HAPPEN?

    1. Sky Properties says

      Yes,technically you are liable…but there is some confusion in latest developments.Now there are rumours that builder cannot take this amount from buyers.He will have to pay himself.
      Only god knows what is going on in this country.

  9. Sushant says

    Hi.
    my agreement was registered on April 16th, 2010. and after that during later months in 2010, i have paid 1% VAT to builder after he sent the demand letter.

    should i be paying 5% VAT?

    also if i purchase a resale flat (which was also originally purchased by first buyer after April 2010), do i pay any VAT?

    regards,
    Sushant

    1. Sky Properties says

      If you have purchased a resale flat you are not liable for VAT.If builder has send demand letter for 1% VAT,then you are liable for 1%.

  10. Rajeev says

    Hi,

    The state sales tax department in a recent circular had asked builders to pay 5% VAT plus penalty on purchase of properties between June 20, 2006, and March 31, 2010, by August 31 this year.

    I booked a flat in June 2006 with initial booking amount of Rs. 50000 for which I got the possession in February 2007. The date of my registered agreement with the builder in June 16, 2006 which is just 4 days before the new rule imposed (i.e. June 20, 2006). But I made most of my payments to builder after June 20, 2006 only.

    My question is that do I need to pay this 5% VAT to the builder if my date of agreement doesn’t fall in this timeline? Or Is it based on the day on which actual payment has been made?

    Regards,
    ~Rajeev

    1. Sky Properties says

      There is a committee discussing the exact details of the payments and rates.Wait for the outcome of the same.

  11. B N Rath says

    Dear sir,
    I bought the flat in the month of Feb, 2010. Please advice if i have to pay 5 %. What about the circular regarding the relief from the supreme court? The builder is saying that you pay 5 %, if it is reduced they will refund it. What should i do?

    1. Sky Properties says

      There is a govt committee working on the details.Until then even I don’t know what the buyers are supposed to do.Its an amazing country.

  12. Ajit Shrivastav says

    Hi, I bought a flat in Mumbai in Oct-2006 for around 34L. So, as per the law 5% vat applies on it. We received a letter from builder to pay 5% which comes up to around 1.6L. Builder has added interest as well totalling it to around 3L. And he has asked to pay before 30th Oct else there will more interest and penalty charges on it. My Question :-
    * Should we ask builder for the breakup since the actual tax may not come upto 5% ?
    * I ve read the news that if we pay before 30th Oct, interest is waived off. Then why is the builder adding interest (to be paid before 30th Oct) ?
    * I am not sure while I am engaging with the builder on the interest amount & breakup for VAT, if it crosses 30th Oct then who is liable to pay the interest.

    1. Sky Properties says

      There is a complete breakdown in this entire VAT debacle by the govt.Now Im told that there is a committee coming up with a formula to calculate the VAT.Until this committee comes up with a formula,I dont know what to say.

  13. Gurunath Malvankar says

    Dear Sir,

    As regards VAT on property in Mah purchased between June 2006 to March 2010 you have mentioned that 5% VAT is payable on construction cost. But the section 42(3) of the Maharashtra Value Added Tax Act
    provides for tax at the rate of 5% on the entire contract value. The developer may opt for this and calculate the tax liability at the rate of 5%. This tax liability is reduced by the amount of taxes paid on purchases i.e. Input Tax Credit. The balance tax liability so computed is to be discharged. Unfortunately builders are demanding 5% VAT on entire
    agreement value and do not reduce it by input tax credit. What is the remedy for flat-owners ?

    1. Sky Properties says

      If even after 65 years of Independence the govt is unable to guarantee a hassle-free house purchase environment,what is the remedy?
      The remedy is to kick out the old and utterly corrupt system and bring in a new system.
      Vote for Arvind Kejriwal’s party if you want to really change the system.Sorry but that’s the only alternative I can see.Enough of this corruption and black money.Time to reboot the system.

  14. Vikash says

    I heard PIL has been filed im Bombay High court from consumers/activists aginst it. Do you have any updates on it?

    Vikash

    1. Sky Properties says

      There is no update that I have on that.Its a total breakdown.

  15. Amol says

    The agreement amount of the flat is 27’83,000 + 75000 (MSEB), agreement date is February 2009. We have received a notice form the builder to pay approximately 3% vat. Is this correct? Because, as per our knowledge it should be around .5% to 3%. What is the base of this calculation? How will we come to know the exact the construction cost? Is it mentioned anywhere in the agreement?

    1. Amitabh says

      I I agree with all that VAT actually must not be charged with retrospective date as plenty of people will not be in a position due to various reason / financial problems facing these days. But our builder has finally worked out to charge close to 2.5% only and is giving proper receipts.

      But again everyone is not in position to pay even close to 2.5% of VAT and I request all to continue fighting to scrap VAT to be paid with retrospective date just based on Bangalore court decision as all decisions can never be based or worked out based on decisions of other states. SOMETIMES I SUSPECT THAT EVEN THE SUPREME COURT PEOPLE ARE ALSO INVOLVED…

      Please continue fighting against Maharashtra Govt / Supreme Court

  16. raja says

    Hello Sir
    I have book my flat on 13th march 2006 however i register my flat on 23 june 2006 and bank pass money to builder in dec 2006 . Do I need to pay tax?
    please advice any possible way to ignore this tax as i have book flat with most of the moeny before 20th june 2006

    1. Sky Properties says

      The date of registration of the sale agreement should be out of the VAT date range.If it is out of that range,you dont have to pay VAT.

  17. Sujata Sahoo says

    I made agreement only in Jan, 10 but till date the flat is under construction. Am I supposed to pay vat @5% or as per method calculated by builder? Please advice.

  18. Abhijit says

    For my flat the date of agreement is 9/08/2005. Then why the builder is asking for MVAT payment?

    1. Sky Properties says

      Vat is like sales tax.Its valid on all purchases.Service tax is valid only on under construction properties.

  19. Kanchan Kadam says

    what exactly going to happen about vat.nobody is clear how much we have to pay. 5% on construction cost or agreement value, if const.cost then who is going to calculate what exactly is the construction cost of flat, definately builder will deny all these things. form where we will get exact construction cost details? every thing is in confused state.

    1. Mayur Panghaal says

      We can only hope that the govt will come up with something sane.God help us all.

  20. Abhishek Vijay says

    Hi I have purchased flat in May 2012, where I have paid service tax and vat on Agreement value of 29 lacs, while cost as per the gov rules is 37,50,000 which is mentioned in index 2 also. Now builder is asking to pay service tax and vat on the value as per the gov rule and not agreement value.. am I liable for that?

    1. Mayur Panghaal says

      Agreement should have been as per govt rates in the first place.If the agreement was made of a lesser amount then you should make the payment.

  21. Ranjeet Saxena says

    I purchased a flat in Nov 2009 on RESALE. The original buyer had purchased from builder (date of sale deed agreement) in March 2006. Is anyone liable to pay VAT?
    Since the applicable period mentioned is June2006 – March 2010 & also only 1st buyer or builder is liable. What is safeguard for us if the builder forcefully made us sign that in case the VAT becomes implemented, we will have to pay.

  22. Diamond1234 says

    November 1, 2012 at 10:40 AM
    We purchased a flat in Dec 2011. The builder gave us possession only after payment of his demanded 4.75% amount of the agreement value towards VAT and Service Tax.
    Ideally, VAT should have been 1% and and 2.575% Service Tax. Am I correct in this understanding? Can I ask the builder to refund the extra amount that he charged us. Please inform. Thanks a lot! You have been doing a wonderful job.

    1. Sky Properties says

      Yes,you are right.He should have issued you a reciept with his VAT and Service tax registration number.

  23. Raj says

    I purchased under construction flat in march 2010 but i got the possision and oc in 2011. How much vat is applicable on my agreement value.

  24. T Dhage says

    Dear Ravi,

    What if builder is not showing the actual VAT computation and proponate liability & holding the possession if we dont pay 5% VAT for the flat registered on 31st March 2010.

    1. Sky Properties says

      Financial year ends on 31st March.Therefore if you registered (bought) your flat on 31st March,you are liable for VAT.How much is a big mystery which even the govt hasn’t been able to figure out.After 65 years of Independence a citizen of this country still doesn’t know if he will ever manage a house of his own.

  25. Sukhvinder Shergill says

    Hi,

    Just purhased a semi-detached bungalow plot from the 1st Owner. Is VAT applicable on Plots too?

    1. Mayur Panghaal says

      VAT is not applicable.For VAT to be payable,the seller has to have a VAT registration number from the sales tax dept.Without this number no one can charge VAT.

  26. sonal says

    sir, we are planning to buy a resale flat in pune. the original owner got the possession of the flat in 2004 from the builder. he sold it to the current owner in 2007, november. my question is that who is liable to pay vat and service tax in this case

      1. sonal says

        but when we get the agreement for buying the loan, we are buying from the second owner so as the first owner has no stake here, what if he refuses to pay. also, if the second owner does not agree to pay in case the first owner refuses, will i face a problem in future? please suggest a solution so that i don’t suffer and can peacefully go ahead with this deal.

  27. suresh says

    what is the present status on vat now. Is there a verdict on case? Has CFBP OR FORAM or Maharashtra Chamber of Housing Industry-Confederation of Real Estate Developers Association of India (MCHI-Credai ) able to bring in some releif since oct 29, 2012

  28. Jignesh says

    Hello, I purchased a flat from builder which was ready and this mentioned in the agreement. However there was no completion certificate. Will this be considered as under construction or constructed flat? Would i be liable to pay VAT?

    1. Sky Properties says

      Yes.You are liable.If there is occupancy certificate then you are not liable.Purchase before or after the occupancy certificate will decide the matter.

  29. Srabana Rc says

    Hi!
    We bought a ready possesion flat in Pune feb2010. Are we suppose to vat @5%? Please suggest…

    1. Mayur Panghaal says

      You are liable to pay vat but at what rate is a mystery.No one including the govt seems to know.

  30. Rakesh says

    hi sir Iam NRI and want buying a flat in underconstruction project just want to know vat,service tax and tds is applicable for nri or not
    pls tell me as soon as possible
    thanks
    Rakesh chandwani

  31. Rakesh says

    Hi sky properties
    I bought a flat from builder 1 year ago that time oc not received but now oc received that time I didn’t pay vat and service tax and builder didn’t intimate me abt vat and service tax and now I am planning to sell this flat can I liable to pay vat and service tax after oc pls suggest as soon as possible

    1. Mayur says

      It is builders headache to collect Service Tax and VAT.If he did not ask,you have nothing to worry.

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