Pune Flat Owners United Against VAT

Attend Flat Owners Meet to Discuss VAT
on Sunday, 28th October 2012, 6:00 pm
at Perugate Bhave School, Pune 411030:

Vivek Velankar - Sajag Nagarik Manch - at an awareness programme about paying Maharashtra Value Added Tax (MVAT) to builders before October 31 deadline

View Flat Owners Meet to Discuss VAT at Perugate Bhave School, Pune 411030 in a larger map

The flat owners association, Akhil Bharatiya Grahak Panchayat, Sajag Nagarik Manch and Grahak Hitwardhini has called for flat owners meet to discuss value added tax (VAT).

In the press conference, yesterday, the organizations, once again, appealed to flat owners not to pay VAT till the builders finish their job by forming a cooperative housing society, submitting tax invoice and clearance from electricity distribution company.

VAT Fact Sheet
by Flat Owners Association and Civil Society Organizations:

First and most important;
‘Do not get panic about the last date for the payment of VAT mentioned in the letter written to you by your builder.’

The last date (e.g., 31st October 2012) for the payment of VAT mentioned in letter is for the builder and not for the purchaser.

But, be sure that in your agreement there is no mention about such date of payment of any such taxes.

Secondly, the letter written by the builder is not a legal notice (sent by any advocate); it is just a request letter.

Liability of VAT Payment:

The purchaser of a ready-possession flat is not liable to pay VAT.

Completion certificate issued by local Municipality / Gram Panchaayat office, Possession Letter issued by the Builder, any address proof of residence such as telephone bill, electricity bill, property tax, passport, ration card etc.; necessarily mentioning the first date of residence along with the date of agreement of sale will serve as the proof of ready possession.

Any other purchaser is liable to pay VAT. The builder is entitled to recover the tax from the flat purchaser. (The owner of a flat after its resale is liable to pay VAT as per agreement. But, builder cannot ask such owner for VAT payment; it is between the parties involved in such transaction.)

Calculation of VAT

There are three ways to calculate VAT.

1) Firstly, the builder is required to pay 1% VAT on the sale price mentioned in the agreement of the sale of the flat (agreement value) for the flats purchased after 1st April 2010.

Purchasing refers to the date of agreement of sale of the said flat.

2) The second option is usually referred as 5% option and this is available right from 20th June 2006 to-date.

Under this option, the builder is required to pay tax @ 5% on the sale price
mentioned in the agreement of the sale of the flat (agreement value). But, the builder is also entitled to claim partial credit of the tax that he has paid on his purchases of building materials. The flat purchaser can bargain with the builder and demand that part of the credit be passed onto the flat purchaser.

3) The third option may be called as ‘Rule 58 option’. Under this option, there is a deduction for all charges and profit relatable to supply of labour and services and also for land price as per ready reckoner in the year of agreement. It can be shown as below:

Taxable sale price = agreement value – (all charges and profit relatable to supply of labour and services (architect, advocate etc.) + land price as per ready reckoner in the year of agreement)

VAT is then calculated on the basis of this sale price as per the materials used (cement, steel, timbre, sand, bricks etc.) and the respective tax rates for such materials.

The tax burden will be the least under this option.

Further, the builder has right to choose one of these options and not the purchaser or the government.

Response to the builder’s letter

Here is a format of the letter as an answer to the builder’s letter.
One may modify it as per own details.

It is advised that purchaser should respond positively to the builder’s letter as usually, it is binding as per the agreement of the sale of the flat.

The C.A. certificate should provide the following things.

1. Gross tax payable (before adjustment for set off) and the set off claimed

2. Taxable price --- (sale price) arrived at (after applying rule 58)

The Format:
Send the letter to the builder by post and get its acknowledgement.

Your Name:
Your Address:
Date:

To,

Builder’s name
Builder’s address (Registered Office)

Sub: Your demand letter dated ***** asking to pay VAT

Sir / Madam,

I have received your demand letter dated ***** asking to pay VAT.

As agreed in the Agreement (clause no. *****) between us for the Sale /
Purchase of Flat *****, I / we am / are ready to pay the VAT amount for the
said property payable to Govt. of Maharashtra.

In your demand letter, you have mentioned the calculated VAT amount as
*****. I hereby request you to provide me the calculation of such amount
pertaining to my flat, duly certified by the chartered accountant.

As the amount seems to be very high for a person(s) like me (us), I/we would
be able to pay the applicable amount to you within a reasonable period of one
month after getting the above mentioned details from you.

I understand that as there no mention about any date for payment of such
popped up taxes, I / we do not entitle to pay any sort of interest / penalty on the
said amount.

Request your cooperation as always.

Thanking you.

Yours,

Name(s) and sign(s) of the flat owner(s)

Any Queries - Call:

Ms. Seema Bhakare 98603 68123

Ms. Veena Dixit--98196 60991

Related Stories:

1) 'Builders confusing flat owners about VAT payment'

2) We refuse to pay VAT!

3) How to Refuse to Pay VAT

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