The Supreme Court has admitted a special leave petition filed by the Maharashtra Chamber of Housing Industry and Confederation of Real Estate Developers’ Associations of India (MCHI-CREDAI) and CREDAI-Pune against the state sales tax department?s move to levy 5% value added tax (VAT) on properties purchased since 2006.
?We have also moved the Supreme Court for a stay on the matter,? said Boman Irani, honorary secretary, MCHI-CREDAI. On August 6, the Maharashtra sales tax department had issued a circular to developers saying that VAT will be levied on flats, shops and bungalows sold between June 20, 2006 to March 31, 2010. This followed the rejection of developers’ appeal by the Bombay High Court on behalf of the buyers against VAT.
The levying of VAT on properties purchased between 2006 and 2010 with retrospective effect has irked the entire real estate sector.
Real estate players, who are already reeling under low demand, fear that this tax will be a further dampener to sales. The tax that will be levied on the value of the property would mean that an apartment worth R30 lakh would cost an additional burden of around R1.5 lakh to the buyer. However, for flats purchased from April 2010 onwards the tax will be 1% of the value.
?There is already a negative sentiment in the market,” says Kishor Pate, honorary secretary, CREDAI-Maharashtra.?The market is already suffering from a number of cumulative setbacks and it desperately needs the support of the government,” he added.
The VAT will be in addition to the existing expenses of registration and stamp duty, interest of 15% per annum and penal interest of 25% that the Maharashtra government is levying.
?This will have an obvious negative effect on buyers, because developers are bound to pass the added cost on to them,? said Subhankar Mitra, head (strategic consulting, West) Jones Lang LaSalle India.