VAT creating what chaos!

By Accommodation Times Bureau

The recent VAT issued by the High Court has created a lot of confusion in the real estate
market.

Though the VAT is applicable to the developer, the developers is in mindset that the buyers has
to pay the tax only adding more burden on the buyers. Deputy CM cleared the fog by saying
that the decision was made in 2000 itself also, it given it has given time to pay the dues from
15th August to 31.

The decision of government and the MCHI-CREDAI and the other builders have taken the
decision to Supreme Court. It is has become a tug of war between the builders and government
and we only hope that the buyers should win, who are already under the burden of so many
taxes.

The final decision will only get clear when the matter will be present in the Supreme Court on
28th August.





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One thought on “VAT creating what chaos!

  1. Off hand >
    Now, that the SC has given its blessing, albeit for the time being, for the authorities to collect, and for developers to pay up, it could only be expected that would speed up the already ongoing exercise . In turn, developers are most likely to accelerate, and try and recover the amounts paid from the purchasers.
    But one very crucial aspect that seems to have, despite pointed out more than once, not having received the due attention of everyone concerned/ percolated through is this: That pertains to the modality of reckoning/quantifying the tax payable by developers, and in turn recoverable from the purchasers.
    Pithily restating : should the concept of ‘works contract’ be strictly and rightly construed, there could be levy of VAT on no portion of the ‘works’ carried out by developer except to the extent it could be considered to have been carried out for and on behalf of a purchaser. In other words, – in respect of any one purchaser, should there be no ‘contract agreement’ entered into andis in place, no levy would be permissible.
    For a straight forward understanding , the canvassed proposition may be illustrated thus: Suppose in a given case the developer has , as evidenced by the requisite ’ certificate of commencement’ procured by him , started the ‘construction works’ , and been carrying on the works on his own till say, the 3oth of June. Assume it is only on the 1st of July, that the first contract agreement (agreement to sell) with a prospective purchaser – P, is signed and registered. Proceeding on the premise that the proposition cannot be flawed on any ground, no VAT can be levied on the developer for the portion of the works on the project carried out up to 30 th June. And, hence, also the developer could not require the Purchaser P to pay any amount on account of VAT on the said portion of the works on construction.
    Looking back, so far one could see, neither in any of the published articles this finer aspect of the issue has been examined; nor been urged before, so not gone into by, courts in the cases decided/reported thus far.
    It is expected that, the clinching proposition advanced above, would be suitably urged in the pending proceedings before the SC , so that a definite ruling is given by the court. Of course, that would be helpful or of avail only in those cases, where depending on the final decision of the SC on other primary issues, the levy eventually comes to be attracted.

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