PIL on VAT collection from property buyers filed

City-based consumer rights organisation Grahak Hitvardhini, on Friday, filed a public interest litigation (PIL) in the Bombay High Court, seeking complete restrain on builders from collecting value added tax (VAT) from those who bought their properties in and after 2006.

The PIL, which is likely to come up for hearing in the first week of October, has made Confederation of Real Estate Developers' Associations of India (CREDAI) and the state government its respondents.

Grahak Hitvardhini founder Sudhakar Velankar said the PIL has challenged VAT collection on the basis on two points. The first one is levying 5% on agreement value as VAT on those who bought property between 2006 and 2010. "No such provision is mentioned in the Maharashtra Value Added Tax Act, 2002. The Act provides for a 5 per cent levy on the contract value, which means on purchase of goods and not the agreement value as the developers claim," said Velankar. Same is true for 1% composition tax as VAT on those who have bought their properties after 2010. "This too is against the provisions of the VAT Act," he said.

Secondly, as per the Maharashtra VAT Act, 2002, VAT cannot be charged on immovable property. "This levy is also against the law as it includes cost of land, which is an immovable property," he said.

The PIL alleges that builders are also refusing to give possession to buyers unless this 'illegal' VAT is paid.

Rohit Gera, vice-chairman of CREDAI, Pune, and MD of Gera Developers Pvt Ltd, said, "I am not aware of the PIL. But builders have been saying that it is unconstitutional to levy VAT on immovable properties. When we went to Bombay HC regarding this, it ruled that the state can collect VAT from the dealer (builder) and the dealer is free to collect VAT from end consumer (buyer). We approached the SC which also said state can levy VAT."

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