As VAT issue goes back to govt, CREDAI firm on 1% norm for flats sold from 2006-10

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SummaryEven as the Bombay High Court on Tuesday dismissed the petition filed by a group of builders challenging the decision to impose VAT on them for flats already sold, the Confederation of Real Estate Developers Association of India (CREDAI) has decided to go ahead with its demand for adopting a simple procedure of charging 1 per cent VAT on their property as per the prevailing norm.

Even as the Bombay High Court on Tuesday dismissed the petition filed by a group of builders challenging the decision to impose VAT on them for flats already sold, the Confederation of Real Estate Developers Association of India (CREDAI) has decided to go ahead with its demand for adopting a simple procedure of charging 1 per cent VAT on their property as per the prevailing norm.

In its recent letters to the state’s chief minister and finance minister, CREDAI has called for the 1 per cent norm to be adopted for the retrospective period between 2006 and 2010. The issue is already pending with the Supreme Court, which had issued an interim order asking that the VAT on properties sold between the said period should be paid by October 31.

Stating that VAT is a legislative matter, the HC said on Tuesday it would not be proper for the court to interfere in the issue. CREDAI refused to comment on the court order.

Its chief Satish Magar said the state government had been asked to adopt a composite VAT policy as per the current applicable rate. “The consumers are uniformly paying 1 per cent tax on the properties purchased after 2010.”

CREDAI director-general Dr D K Abhyankar said as per the existing government policy for the retrospective period, the rate differed from property to property depending on its value. “The rate depends on the value of the property that is worked out by deducting the cost of land from the cost of the sale agreement and the rate ranges between 0.75 per cent and 3 per cent,” said Abhyankar.

Not only is the prevailing lack of clarity on the payment of VAT being objected to by the real estate sector, but the call by some consumer groups asking people not to pay VAT is only likely to hit the government’s recovery process, according to officials.

Vivek Velankar, president of Sajag Nagrik Manch, said nearly 30-50 per cent consumers had not paid VAT as of now after “their awareness on the apex court judgment that it should be paid by the builder and not the consumer”.

However, developers say any delay in the payment will only lead to more court cases on the issue. “It is imperative that the VAT is paid as the Supreme court in its interim order has directed,” said Rohit Gera, managing director of Gera Developments.

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