SME Times News Bureau | 24 Aug, 2012
Realtors across Maharashtra have been ordered to pay by Aug 31 the value added tax (VAT) on all new flats, shops or bungalows sold between June 2006 and March 2010, an official said in Mumbai on Thursday.
The government decision, which may hit property owners and the realty industry hard, will help mop up Rs.800 crore, said a sales tax department official, requesting anonymity.
"As per the rules, it is the responsibility of the builder/developer to deposit the VAT with the state government. If they have not done it so far, we have given them time up to Aug 31 to file the returns," the official said.
However, as is generally the case, the burden if the tax would be passed on to the consumers who will be required to shell out five percent of the value of the flat, shop or bungalow bought during that period, the official said.
Developers and builders all over the state are now likely to serve notices to those customers who purchased flats, shops and bungalows between June 2006-March 2010, demanding the VAT, if they have not already paid up.
For instance, a buyer who paid Rs.1 crore for a flat or shop or bungalow anywhere in the state will be liable to shell out Rs.500,000 by Aug 31.
Maharashtra residents who purchased property between June 2006 and March 2010 will have to pay a VAT of five percent, along with an interest of 15 percent per annum and 25 percent penal interest, said an official of the Confederation of Real Estate Developers' Association of India (CREDAI).
He explained that the Maharashtra Chamber of Housing Industry had challenged the state government's move in 2009, but it lost the case in the Bombay High Court. An appeal has been filed in the Supreme Court.
The sales tax department official said that since there was no injunction from the Supreme Court, the department decided to act in the matter and recover from the realtors the VAT with effect from June 2006.
The VAT applicable in Maharashtra is in addition to the 3.09 percent service tax imposed by the central government recently.
The Maharashtra government had imposed a five percent VAT on property sales following the example of Karnataka in the wake of a Supreme Court order.
This led to an anomaly as the taxation system followed in Karnataka was totally different from the one prevailing in Maharashtra.
The Maharashtra government subsequently reduced VAT on sale of property to one percent from April 1, 2010.
