Builders, consumer groups in row over VAT

Even as builders have once again issued notices to flat owners asking them to pay the Value Added Tax (VAT) before October 31 for their houses bought between 2006 and 2010, consumer groups are advising them against doing so, arguing that the October 31 deadline is for the builders to pay VAT to the government and not for the buyers.

Consumer activists also say that the flat owners willing to pay the tax should only do so after getting a VAT invoice from the builder to avoid paying more than the required amount.

As per a recent Supreme Court order, the Maharashtra sales tax department has directed the developers to pay the VAT for flats sold between 2006 and 2010 before October 31 to avoid levying of interest and penalty. Subsequently, most builders have sent notices to flat owners to pay VAT.

Activists allege that there is a lack of transparency in the way the developers are collecting VAT from purchasers and a lot of ambiguity in calculation of the amount. "The amount of VAT to be paid by the flat owner, if calculated rightly, cannot be greater than one per cent of the agreement cost. But the builders are asking for anything between 3.5 and 5 per cent," says Vivek Velankar of Sajag Nagrik Manch, which held an awareness campaign among the flat buyers on this issue.

According to Velankar, not more than 25-30 per cent of people who bought flats in the given time have paid the VAT, while others have decided to wait and watch.

"We are advising the purchasers against paying VAT to the developers by October 31. It's not mandatory on them to do so before this deadline. The deadline is for the developers to pay the VAT to the government. There are quite a few builders who have paid VAT without taking anything from their clients," says Velankar.

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