Maharashtra’s sales tax department has received 10,700 registrations and 56,000 returns towards five per cent value-added tax (VAT) from builders and developers for the sale of flats under construction during the 2006-2010 period. The Supreme Court’s deadline for these was October 31.
A sales tax department official said, “The actual amount would be known soon, as the assessment is underway.
On Tuesday, the Bombay High Court had dismissed a bunch of petitions challenging the state government’s decision to charge builders five per cent VAT on buildings that were under construction from June 20 2006 to March 31 2010.”
The official added builders and developers who had failed to meet the October 31 deadline would have to pay an annual interest of 18 per cent and a penalty of up to 100 per cent.
“The department is currently examining the defaulters and after the assessment, interest and penalty would be recovered from them,” the official said.
Anand Gupta, honorary general secretary, Builders’ Association of India, said, “The complicated and confusing calculation of VAT on sales of flats for the 2006 -2010 period created an avoidable controversy not only among flat buyers, but also among sales tax professionals and government officials, as there is no unanimity in the formula for the deduction of land cost and TDR (transfer development rights) cost.”
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Gupta suggested the Maharashtra government come out with a workable and easy method of calculation, similar to the one used to calculate the one per cent VAT levied from 2010.
If this was made applicable, it would steeply increase the revenue of the Maharashtra government, owing to the high compliance in payment of VAT.
As a section of the ministers had opposed this, the state cabinet decided not to intervene in the matter.
“If the government plans to intervene, the message would be the government is helping builders and developers, and is not in favour of protecting the interests of flat buyers. The court has already clarified the onus of the payment of five per cent VAT lies on builders and developers, not on flat buyers,” said a senior minister.