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Old 21st August 2008, 19:31   #1
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Default VAT and service tax on property/flat

Not sure if this is the right place to post this. I searched for this but did not get any thread.

I would be buying a 2 BHK flat in Pune in near future. Apart from scary interest rates, I heard about VAT (5%) and service tax (4.5%) to be charged on flats. Could you please let me know more on this? Also should I wait and watch on tis OR you know about the timeline when this is going to be implemented?

VAT and service tax makes whooping 9.5% to be charged and I dont want to take risk as anyways propoerty in Pune is not cheap at all.
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Old 21st August 2008, 19:41   #2
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This is certainly scary for the people who plan to or have bought properties in Maharashtra in the recent past. I just googled on this news and found that this is applicable for all flat owners who got their property transferred to them after June 2006. With soaring property rates this VAT + S.tax would add up to a painfully high amount.
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Old 21st August 2008, 19:45   #3
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Quote:
Originally Posted by neoonwheels View Post
VAT and service tax makes whooping 9.5%
What about registration and other costs involved? In bangalore you will have to pay 15% above the sq feet rate quoted.
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Old 21st August 2008, 19:49   #4
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Originally Posted by gkrishn View Post
What about registration and other costs involved? In bangalore you will have to pay 15% above the sq feet rate quoted.
I just heard about 9.5% on total amount paid for flat. Now am not sure it only the saleable price of the flat or includes:

1. Parking (Which is actually not allowed to be sold)
2. Registration
3. Soc charges
4. Agreement

The area where I stay right now has crossed 6500 per sq ft rate. This has made me go a bit outside. NOw this VAT + service tax made me worried.
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Old 24th August 2012, 13:22   #5
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Default Re: VAT and service tax on property/flat

High court has removed the hold on the payment of VAT. People who have bought a flat between the years 2006 to 2010 would have to pay 5% VAT. I think its applicable to the whole of Maharashtra.

Quote:
Thousands of people who bought flats between 2006 and 2010 will have to pay value added tax (VAT) at the rate of 5% of the value with retrospective effect.

On August 6, the state's sales tax department issued a circular to developers saying VAT would be levied on flats, shops and bungalows sold by them between June 20, 2006 and March 31, 2010 .

Several Mumbai-based developers said they would soon send VAT collection notices to such flat purchasers.

The new burden on a customer who bought a flat at Rs 50 lakh works out to a minimum of Rs 2.5 lakh.
Quote:
MCHI-CREDAI said each flat buyer in Maharashtra will have to pay up to 5% additional taxes for flat purchased by them along with interest at 15% per annum and penal interest at 25% that the state government is levying. Flat buyers are already reeling under the pressure of 3.09% service tax which has been implemented by the central government.
Source:
VAT the hell! Home owners get big shock - Mumbai - DNA

Pay 5% VAT for flats bought from 2006-10 - The Times of India

Last edited by _raVan_ : 24th August 2012 at 13:27.
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Old 24th August 2012, 16:06   #6
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Default Re: VAT and service tax on property/flat

Hello everyone,

CREDAI is just a builders' association and not a legal body, Since the case is already pending in court, the matter is 'sub judice' and under the purview and direction of the courts.

A non legal entity giving an advertisement in the papers is NOT tantamount to a ruling by the courts. Please wait till the legal picture is clear, there has to be a written letter by way of a notice and empowered by a notification by the State Finance department to the effect that VAT & other taxes are payable and will contain information as to where it has to be paid and by what time.

Once again, do NOT go by what's written in the papers, there is no credible Court ruling in writing to justify the same. (as of date atleast).

And please don't send me PMs asking what's the situation, there is no situation as of now, just a builders' association putting up an ad is not a law. Again, the ONUS or legal liability of collecting tax and paying it into state coffers is always the sellers, never the buyers. (that's why MRPs include tax).

I am not a lawyer, or a Chartered Accountant, just a person familiar with the law.

Last edited by mmmjgm : 24th August 2012 at 16:08. Reason: disclaimer.
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Old 7th November 2012, 17:19   #7
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Default Re: VAT and service tax on property/flat

What's the update on this. I just received a notice from the builder to pay VAT on a flat I bought in 2007 in Pune. Are people paying this or waiting for any further clarification?
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Old 7th November 2012, 17:30   #8
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Default Re: VAT and service tax on property/flat

I received the notice from the builder too. But the VAT has to be paid by the developer\builder & not the purchaser. Wait till the legal picture has been clarified. I know people who have already paid the VAT.
My flat was purchased before June\July 2006 so am not worrying too much.

Last edited by mb_jg : 7th November 2012 at 17:32.
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Old 7th November 2012, 18:03   #9
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Default Re: VAT and service tax on property/flat

I also received notice from our builder for VAT. Also he is talking about service tax. I purchased flat in August 2009.

Though government is saying this is to be paid by builders but builders have put this clause in agreement which means I need to pay. Right now we are locked into calculation of VAT. Lets see what happens. We chose to pay after all clarifications from builder. Most of my friends paid VAT from their pocket to builders.
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Old 7th November 2012, 18:06   #10
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Default Re: VAT and service tax on property/flat

Quote:
Originally Posted by carboy View Post
What's the update on this. I just received a notice from the builder to pay VAT on a flat I bought in 2007 in Pune. Are people paying this or waiting for any further clarification?
Even if as per order builder has to pay the VAT of 5% for the said period, it will transpire to some % to the owners. As I understand it may come to 1-2% or something similar depending upon computation of the builder with various deductibles and builder will surely try to get that much from owners. There is no ruling on the same and no regulations which are laid out by the order or any governing body. It is going to be case to case basis as per builder, particular construction, various costs involved in that construction etc and then the VAT dues that will come to owners. I know one such discussion happening in Pune between owners and builder, builder and owners coming to agreement to this mutual discussion. So you should get the group of owners together and have proper discussions with the builder to make the situation clear. It will not just work by sitting and waiting for things to happen.
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Old 8th November 2012, 08:28   #11
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Quote:
Originally Posted by neoonwheels View Post
I heard about VAT (5%) and service tax (4.5%) to be charged on flats.
VAT and Service tax is applicable only on the under construction flats. If you are buying a ready possession flat then you dont need to pay the above. This is my understanding. I had a bought a flat in 2008 and then sold it in 2012. Uptil now I havent recd any VAT payment notice from the builder, will I have to pay the VAT even if I have sold the flat. Have asked a few experts in my locality but none have any fool proof answer.
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Old 8th November 2012, 10:47   #12
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Default Re: VAT and service tax on property/flat

Quote:
Originally Posted by ghodlur View Post
VAT and Service tax is applicable only on the under construction flats. If you are buying a ready possession flat then you dont need to pay the above. This is my understanding. I had a bought a flat in 2008 and then sold it in 2012. Uptil now I havent recd any VAT payment notice from the builder, will I have to pay the VAT even if I have sold the flat. Have asked a few experts in my locality but none have any fool proof answer.
I bought the property in Dec 2010 and 1% VAT is applicable for me which I already paid last week. The builder has given it in written that if supreme court cancels the VAT for property, I would get my money back.

Looking at the corruption and new ways of milking people, I guess I wont get my money back. This Govt has an epitome of milking people with as may ways as possible.
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