If there happens to be some arrears even after the GST was implemented then not VAT but the GST will be paid on the arrears.
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VAT on under construction property in Uttar Pradesh
We had booked an under construction property in Noida in December 2015. Till date we have made 95% payment for the property. The Builder had charged Service Tax on this amount @ 4.5 % which has also been paid. Now the builder is asking us to pay VAT Arrears on the same amount @ 3%. He has mentioned a circular for which the link is provided below. http://comtax.up.nic.in/Circulars/2015-16/Circular_no_1516077.pdf Can you please help in stating if the tax that the builder is asking for is legitimate or not. As per my understanding, there in no VAT on under construction property in the state of Uttar Pradesh.
Asked 8 years ago in Property Law
Religion: Hindu
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3 Answers
an agreement formalised by a builder with a buyer before a project is completed is in effect a work contract and hence a VAT can be levied
2) The SC said, "It is clarified that activity of construction undertaken by the developer would be works contract only from the stage the developer enters into a contract with the flat purchaser. The value addition made to the goods transferred after the agreement is entered into with the flat purchaser can only be made chargeable to tax by the state government."If a home buyer enters into an agreement when the project is 70% complete, then the developer could charge him VAT only on the balance 30% construction cost
in new india construction company v/s state of haryana 2011 ILLJ 307 P &H
Builders in Uttar Pradesh may soon have to pay value added tax (VAT) on the sale of under-construction projects, a move that may push up property prices.
The state government is considering a proposal under which builders will have to pay VAT on under-construction projects such as flats and houses for which they have entered into an agreement with a buyer, promising handover when completed.
The government sources said that the proposal sent by the commercial tax department sought to levy 1% VAT on the total cost of the project, excluding the cost of land.
The move comes after a recent Supreme Court judgment that upheld a Bombay High Court verdict asking builders to pay 5% VAT on the sale of under-construction projects.
