on under construction flats VAT is payable
2) you had booked flat in 2012 . at time of allotment builder had told you vat charges
3) builder is right in demanding VAT till june 2016
Demand for accumulated VAT post GST implementation
I booked an flat in Dec 2012 and in the Cost sheet provided with the allotment letter the builder had mentioned a VAT of Rs.45,325 to paid at the time of apartment handover.As per the construction agreement the flat was supposed to be delivered in Jun 2016. Since GST has been implemented from Jul 1st the builder has made a demand for accumulated VAT Rs.41,440 . My question Is the builder right in demanding accumulated VAT? Am i contractually bound to pay VAT to the builder when the apartment is still not handed over and right now builder has communicated that it will be handed over in Dec 2018.
Asked 8 years ago in Property Law
Religion: Hindu
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2 Answers
Service tax and VAT are applicable, only on properties that are booked at under-construction stages.
An under-construction property can be divided into three parts, vis-à-vis its cost components. The first part is the cost of the land, on which neither VAT nor service tax is applicable. The second part is the cost of materials. According to the Supreme Court’s decision, in the case of Raheja Development Corporation vs the State of Karnataka, this can be deemed a part of the work contract and thus, is liable for VAT. The third part is the cost of construction, which largely involves labour charges and can be treated as a service that is rendered by the builder to the purchaser. Therefore, service tax can be levied on this component.
Since you have entered into the agreement in the year 2012, the applicable VAT upto 30 June is to be paid, the calculation made in this regard may be checked with the builder.
