MJ Krishnamurthy's Expert Profile

Queries Replied : 1703

About me

I am a retired Assistant Commisioner of Commercial Taxes of Karnataka. I retired in 1998 at the age of 58.During this service I tried to go in detail about sales tax laws. Immeadiately after retirement some companies wanted to retain me as their consultant. That is how my touch with the subject of VAT laws continued.The website of CAclub india is giving a good opportunity to share my knowledge with others. I am an exserviceman from IAF. So, Iam a little different from other taxmen. We should do some service to the community that has offered us so much, That is my purpose.....Bye.

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Jayendra Jadhav says : VAT liability on flats
Thank you Sir. Kind People like you are rare who make a difference to common man like us by resolving the legal queries which are way beyond the understanding of common man. Thank you very much sir for reading through the queries raised by me and helping me to understand them. The work you are doing is great. God bless you sir.

Jayendra Jadhav says : VAT liability on flats
Thanks a lot sir for your guidance here.

MJ Krishnamurthy says : VAT liability on flats
Mr J Jadhav, In their letter the builder has not given a correct picture of law. Observe the following points: 1) Sec 42(3) specifies 5% composition tax "on the sales effected by way of transfer of property in goods(whether as goods or some other form)involved in the execution of works contract,in lieu the amount of tax payable by him under this Act".Here note the words" transfer of property in goods".Land is not 'goods'as per Sale of goods Act.Immovable properties are not goods.2)'in lieu of the amount of tax payable by him under this Act'.No tax is payable on sale of land under Maharashtra VAT Act.So cost of land has to be excluded from the total value of agreement. 3) Also as per Sec 42(3) VAT is payable on the trasfer of property in goods only and not for the amenities provided in various forms as explained by me earlier,and not on other charges like registration,electricity,water sewage,cable etc. 4) If your agreement was registered before 31st March 2010 these rules are aplicable.If it is registered after 1st April 2010 a special scheme as provided in notification No1510/CR-65/taxation-1 may be opted for by the builder,in which,1% tax is applicable on the whole of agreement value including land cost and amenities. But when they are demanding 5% VAT cost of land and amenities are to be deducted from the total value before charging VAT @5%.In view of these points the builder is making a wrong demand,quite intentionally,and can be prosecuted for it. So,you may get a lawyer's notice issued or even go to consumer'court. MJK

Jayendra Jadhav says : 5% VAT on apartment sale
Dear Sir, I written back that he cannot charge this way and here is what they responded. =========================== "MVAT Provisions applicable to agreements for sale of flats registered upto 31.3.2010: As per provisions of Section 42(3) of the MVAT Act, the dealer is liable to pay tax on the sales effected by way of transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract, he may subject to such restrictions and conditions as may be prescribed, in lieu of the amount of tax payable by him under this Act, whether in respect of the entire turnover of sales effected by way of works contract or in respect of any portion of the turnover corresponding to individual works contract, pay lump-sum by way of composition equal to five per cent of the total contract value of the works contract in the case of a construction contract after deducting from the total contract value of the works contract, the amount payable towards sub-contract involving goods to a registered sub-contractor. Construction contracts have been notified in Notification no.VAT-1506/CR-134/Taxation-1 dated 30th November 2006. Thus there are no deductions specified in the Act towards cost of land, etc... in case of composition scheme of tax payment (Section 42(3)) applicable in case of Construction contracts. MVAT on sale of flats can be computed by following provisions of Rule 58(1A) of the MVAT Rules, wherein deductions towards cost of land shall be determined in accordance with the guidelines appended to the Annual Statement of Rates prepared under the provisions of the Bombay Stamp (Determination of True Market Value of Property) Rules, 1995, as applicable on the 1st January of the year in which the agreement to sell the property is registered: Provided that, deduction towards cost of land shall not exceed 70% of the agreement value (maximum permissible deduction limit). The balance after claiming deductions as prescribed in the Rules shall be value of goods relating to transfer of property in goods liable to tax at regular rates (5% or 12.5%). These are two methods for VAT liability determination in case of Construction Contracts: 1) Under Section 42(3) of the MVAT Act, 2002 (w.e.f 20.6.2006) & 2) Under Rule 58 (1A) of MVAT Rules,2005. The Company has decided to determine MVAT liability by following provisions of Section 42(3) of the MVAT Act, 2002. ============================== Now after readin the above i could not understand anything. Do you have any idea about the Section 42(3) of the MVAT Act, 2002.? Do you still feel i should get a lawyer or go to consumer court?

MJ Krishnamurthy says : 5% VAT on apartment sale
Mr J jadhav, As I have already poited out your builder is demanding a wrong amount as VAT.VAT is not applicable(if 5%)on amenities like,society,club,sports,swimming pool,electricity,water,and sewage connection charges,security etc. If they are witholding handing over of a flat to you,then you may get a lawyer's notice issued or approach consumers court on this problem. any one of the methods will be successful....MJK