SC order makes VAT compulsory for builders 9/30/2013 30.9.2013 (UNI) Following the recent order of the Supreme Court which has upheld the Bombay High Courts decision on Value Added Tax (VAT), builders will have to pay VAT now. The apex court has upheld the decision by the Bombay High Court accepting the state governments decision to charge builders a 5 per cent VAT on buildings that were under construction from June 20, 2006 to March 31, 2010. Builders had challenged the states decision on the grounds that it discriminated between buildings built before and after 2010. As per the states composition scheme, developers of buildings under construction from 2006 to 2010 should pay VAT at 5 per cent of the Works Contract, which includes the cost of construction and excludes the land value, the amount paid to the subcontractor, service charges, etc. But for buildings under construction from April 2010, builders have to pay VAT of only 1 per cent of the total agreement value. According to Sunil Mantri, vice-president, Naredco & CMD Mantri Realty, imposing 5 per cent VAT under Section 42(3) of MVAT on flat purchasers from June 20, 2006 to Mar 2010 would impact consumers who bought flats during this period, as most of the apartments under construction during that period have been handed over to customers. We respect the Supreme Courts verdict, but as the fine print of the judgement is not yet available, we will study the same. However, it will be very difficult for builders to recover the VAT amount from the customers and this will lead to numerous disputes between developers and customers, he added. As per experts, there are two alternate valuation rules available under Rule 58 of MVAT. UNI
Posted on: Sat, 26 Oct 2013 17:35:09 +0000
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