• Retrospective MVAT

I have received a notice from the lawyer of my builder in Pimpri, Pune. Flat is in Pimpri, Pune 10 days ago. The notice says to pay vat@5% plus legal notice charges 5000/-

Registration done in May 2007, possession letter from builder in April 2009 and completion certificate dated Mar 2010. Builder had sent letter for mvat @2% in Feb 2010 and then for 1% later in during 2010.

Now what should I do with this legal notice of the builders lawer? How to respond and what should be the stand?
Asked 8 months ago in Property Law from Navi Mumbai, Maharashtra
Religion: Christian
Hi, you have to contact the local advocate and replay the same.

2. When the property was registered in your name then you need not pay the same, we don't about the exact content of the legal notice otherwise we guide you accordingly.
Pradeep Bharathipura
Advocate, Bangalore
4104 Answers
133 Consultations
4.3 on 5.0
1) you have not clarified whether in pursuance of letter from builder you have paid the MVAT at 2%in February 2010 and for further 1%

2) you have to engage a local lawyer and reply to legal notice . 

3)  Before 2006, no VAT was levied on property sale. The state introduced it in 2006 after the Supreme Court passed an order in 2005, putting developers and contractors in the same bracket.

4) The tax liability,  varies because of several parameters such as construction costs incurred by developers (who collect the amount from buyers) after deducting the land price, which accounts for almost 70-80% of the total costs in Mumbai.
Ajay Sethi
Advocate, Mumbai
23107 Answers
1213 Consultations
5.0 on 5.0
look your agreement about mentioning of vat tax because if there s no  no agreement between the builder and buyer about vat then it cannot be paid by the buyer. then it shall be paid by the builder. 

the supreme court has decided in grahak hitovardhani case 2006 that VAT is to be paid by the buyer only in the cases where builder and buyer is agreed on vat otherwise it shall be paid by the builder. 

vat is applicable in the case where completioin  certificate is issued by the appropriate authority. 
Shivendra Pratap Singh
Advocate, Lucknow
2729 Answers
41 Consultations
4.9 on 5.0
1) In 2006, the state government imposed a VAT of 5% on constructions made between 2006 and 2010. The move resulted in an additional tax liability on flats, shops and bungalows sold by developers between June 20, 2006, and March 31, 2010.

2) Supreme Court  said Value Added Tax (VAT) cannot be imposed on buyers

3) most builders have passed in the burden on flat purchasers 

4) reply to legal notice should not cost more than Rs 10000
Ajay Sethi
Advocate, Mumbai
23107 Answers
1213 Consultations
5.0 on 5.0
Hi, for professional fee of the advocate is different from person to person better you sent a reply through advocate.
Pradeep Bharathipura
Advocate, Bangalore
4104 Answers
133 Consultations
4.3 on 5.0
A buyer is unaware of miscellaneous charges attached to under construction flat. Dream of owning a house is still a dream for many and in order to bring affordability factor, most of the additional charges are not disclosed to the end user. One such monster is VAT (Value Added Tax) and Service Tax levied on the under construction flats. As per ruling of Honorable Supreme Court of India, the sale of under construction flat / property is liable to pay VAT. VAT and Service Tax are not applicable for “Constructed Property”. It is only applicable for under construction flat. 

After 2006 it is the duty of the buyer to paid VAT tax.  The Supreme Court has specifically held that only goods incorporated by the developer after entering into an 'agreement to sell' the immovable property under construction would be subject to the VAT levy. It will not be easy to compute VAT on such a transaction.

Look in to the sale agreement clause mention about VAT. VAT & Service tax should be specifically mentioned in the sale agreement and which party will bear this cost.Land cost is exempted from both VAT and Service Tax
Ajay N S
Advocate, Ernakulam
1905 Answers
19 Consultations
5.0 on 5.0
You can either refuse to pay the vat or pay it under protest to recover it from the builder through appropriate proceedings in a competent court. Reply to the legal notice through your lawyer, the cost whereof can be told by only the lawyer whom you intend to engage. It is the liability of the builder to pay the vat.
Ashish Davessar
Advocate, Jaipur
18057 Answers
445 Consultations
5.0 on 5.0
If you are looking to buy a flat, you must also budget for service tax and Value Added Tax (VAT) in addition to the purchase price and stamp duty. With a recent Supreme Court ruling on sale of under-construction flats, there is possibility of demand of VAT (where it was earlier not collected) for flats sold years back. The Supreme Court's larger bench in the case of Larsen and Toubro v/s State of Karnataka & Another (Civil Appeal No. 8672 of 2013), in September 2013 affirming the decision in the case of Raheja, that is, any agreement entered into by the builder/developer before completion of construction amounts to works contract and is, hence, liable to VAT. The real estate industry may witness number of demand notices from VAT authorities for past periods. Demand will not be restricted to VAT amount alone, but also loaded with interest and penalty. 
The liability can be recovered from flat owners if the contract provides for the same. Disputes could start between developers and purchasers if there are no clear contractual terms for claim of VAT. VAT may vary from state to state as it is state subject and the builder calculates for under construction flat based on what is beneficial for them.
VAT is applicable for underconstruction flats hence you may have to pay it as per the notice received.
T Kalaiselvan
Advocate, Vellore
13915 Answers
127 Consultations
5.0 on 5.0
No, I did not pay the vat asked per letter from builder. From my society people I understand that the builder has not given a receipt to those who paid 1%. I do know of anybody paying 2%.From the newspaper articles I understand that the flat buyer is not liable and need not pay. 

Please be aware that VAT and Service Tax are not applicable for “Constructed Property”. It is only applicable for under construction flat. Secondly, VAT may vary from state to state as it is state subject.  Have you purchased the constructed or under construction property?



This property is in Pune and I stay in Navi Mumbai now.
I want to know if I am liable to pay this?

If you are buying a under construction property, wherever you may reside, you may have to pay the VAT as applicable.





How much will it cost me to send a legal reply from a lawyer?

The lawyer fee shall be informed to you by the lawyer whom you desire to engage for this purpose.
T Kalaiselvan
Advocate, Vellore
13915 Answers
127 Consultations
5.0 on 5.0

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