BUILDERS AND DEVELOPERS ARE STRUGGLING FOR “VAT” RECOVERY BY THE BUYERS

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Burdened by the Value-Added Tax (VAT) demanded by Maharashtra’s Sales Tax Department on all property deals, Developers are struggling to recover the amount from flat Buyers to minimize their tax load.

Some Developers appear to have given up trying to recover the amount from people who have already taken possession of flats, but they are hoping to be able to get this payment from Buyers who have yet to take possession.

According to the President of Maharashtra Chamber of Housing Industry (Navi Mumbai Unit) Arvind Goel stated, “God knows whether they will be able to collect the VAT amount or not. If a Developer tries to recover an amount of Rs.50, 000 by any way of VAT from anindividual flat Buyer, he may have to spend as much in litigation. Even after that they are not sure whether they will be able to recover the money.Goel has VAT dues totalling about Rs. 25 Crore that he is seeking to recover from Buyers who have already occupied flats. Most of these flats are resold and he doesn’t have the facilities to track down these defaulters, send notices, or pursue legal cases.

According to Anand Patvardhan, who has conducted seminars on this matter says, however, Tax Experts are still questioning the reasonableness of enforcement of VAT. It is a violation of the constitution. A flat is an immovable property, so VAT cannot be imposed. This anomaly should be challenged in Court.Patvardhan had advised flat Buyers to make Right to Information (RTI) applications to get details about the VAT paid by the Developers and also seek a breakup. If the Developer has not paid the amount, one should demand an inquiry, because the Government is responsible for the mess.Other Tax Experts inform that a petition has been made to the State Chief Minister to rationalize the charge to 1% instead of 5%, but they are disappointed that they have not heard anything yet from the Government.

According to the Managing Director of Puranik Developers, his Office was sending out demand letters to defaulters. They will pursue the matter.Those who have got the possession of the flat will have to pay before getting possession of the flat will have to pay before getting possession. But, in the case of those who have already got possession it will be difficult. I hope they will understand and pay the VAT amount.Developers are sending these VAT demand letters by registered post with an aim that if the matter goes to Court the registered notices will have a Legal basis.

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