VAT on Builders

The flat owners association and civil society organizations on Tuesday blamed the builders’ lobby for creating confusion among flat owners about payment of value added tax (VAT), through social advertisements. The association claimed that neither the flat owners nor the builders were willing to pay the VAT, but the builders did not want to openly go against the government.
The charges were made during a news conference addressed by Suryakant Pathak, president of the Akhil Bharatiya Grahak Panchayat, Vivek Velankar, founder of Sajag Nagarik Manch and Sudhakar Velankar, president of Grahak Hitwardhini.
Pathak said, “Confederation of Real Estate Developers’ Associations of India (CREDAI) published advertisement about collection of VAT. Some of the local builders have started sending mails to flat owners demanding immediate payment of the VAT amount, ranging from 0.66% to five per cent over the total agreement cost. The most important fact ignored by the developers is that many of them have not formed any cooperative housing society of flat owners. These builders also create hurdles in handing over conveyance deeds to flat owners.” The civil society organizations appealed to flat owners not to pay tax till the builders finish their job by forming a cooperative housing society, submitting tax invoice and clearance from electricity distribution company.
Reacting to the charges, Satish Magar, president of CREDAI, Pune Metro region, said, “The builders’ have already approached the Bombay high court seeking a uniform formula for calculation of VAT. We are not interested in over-charging our customers, we are a service provider. The advertisement was published to inform the flat owners about the government’s decision and there was no intention to misguide people.”
Sudhakar Velankar said, “The cost of land, raw material and other materials on which the VAT is already charged should not be considered during the calculation of VAT on flats. Unfortunately, the builders have not informed flat owners about it and were asking them to pay higher amount as VAT. I have copies of letters sent by some builders to flat owners demanding VAT ranging from one per cent to five per cent.”
Vivek Velankar claimed that the builders were also hit by the new guidelines, but they were not taking the customers’ side. Flats in a locality are sold at almost the same price, but VAT amount varies from builder to builder. This is ridiculous, he said.
“We want builders to provide all the promised amenities to flat owners and then look for payment of VAT. The government has lost money in various projects, and it was looking to recover part of it by charging VAT. The government is aware that flat owners in urban areas spending lakhs can afford to pay a few thousand more in the form of VAT,” Velankar said.