(TRC:175877) Confusion still remains constant on VAT

Confusion still remains constant on VAT
By Accommodation Times Bureau
Even after the deadline to pay the amount of VAT, the confusion on the percentage to be levied has not been clear yet. The state cabinet on 31st October discussed the possibility of providing relief in collecting value-added tax (VAT) from builders for under-construction flats sold between 2006 and 2010. A demand was raised in the state cabinet to apply the post-April 2010 composition scheme of levying 1% of the agreement value to buildings constructed between 2006 and 2010 instead of 5% of the works contract value being currently sought.
The High Court has already denied the petitions filed by the builders' body regarding VAT. However, the cabinet is yet to take a decision on this. A group of senior cabinet ministers will discuss the matter and take a final decision in a few weeks' time. According to senior ministers who demanded an extension of the deadline to put the scheme into effect, state finance minster Jayant Patil dropped hints that he was willing to consider the demand at least for smaller flats with a value of less than Rs 1 crore.
Meanwhile, 9,600 developers have registered themselves with the sales tax department and the number is expected to rise further. Under the state's composition scheme, developers of under-construction buildings in the 2006-10 period should pay VAT at 5% of the works contract, which includes the cost of construction and excludes the land value, amount paid to subcontractor, service charges etc. But for under-construction buildings from April 2010, builders have to pay VAT of only 1% of the total agreement value. Builders had to pay VAT on the 2006-10 flats by Wednesday or an annual 15% penalty; there are reports that developers are asking for 300-400% of the tax from November 1 onwards.
A day after a cabinet meeting discussed the contentious issue of value-added tax (VAT) for flats; pressure is mounting on chief minister Prithviraj Chavan to reduce it from 5% to 1%. It has been brought to his notice that it is wrong to charge 5% VAT, particularly for flats sold after 2010 as the relevant charge is 1%. It is incorrect to recover the amount with retrospective effect, the CM has been told.

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