Liability of vat and the st - on flat

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

29 December 2011
Subject – Liability of VAT(Value Added Tax) and the ST(Service Tax) on
Purchase of Residential Apartment(FLAT in Bangalore – Karnataka)

Respected Sir,
Me and my wife (XXXX) purchased a FLAT C# XXX on 1st Floor having SBA
of 1650 Sq.ft in “XXXX Estate” constructed by builder “XXXX” in
Bangalore went into “Agreement To Sell” in Jan 2010 with Possession
Date of Dec 2010, Bangalore – XXXX. Note - We had only “Agreement To
Sell/Sale Agreement” done and did not had any construction agreement
at that time.

Total Apartment Floor to be constructed in the Project are – 10 Floors.
My Flat is on – 1st Floor, C Block, C # XXX
At the time of my Booking – 5 Floors were already constructed
(Electrical Wiring/Painting etc were done…I mean it was almost
finished when we booked the Flat in Jan 2010, But builder took more
time to construct remaining floors due to some issues and I am Not
Sure if they have taken the Occupancy Letter from BDA.
(Quick question here is does this property becomes “immoveable” , if
so I am not liable to pay VAT/ST right?please clarify)

Agreement Page 8i Says –
“If any further tax is liable to be PAID in respect of anything done
or deemed to be done under the agreement , in respect of “Schedule A”
property through any prevailing or future statue/law, and should any
authority raise any demand for any such payment, the PURCHASER hereby
agrees, promises and assures to make such payments.”

Sale Agreement was done on 21st Jan, 2010 with
Possession Date as Dec, 2010.
Current Situation – Not letting me know the Possession Date despite
many requests.

My sale agreement says to pay 51,11,500/- (Total as per Cost Sheet)
49,11,500/- – is towards (Basic Price+1 Covered Parking + BWSSB and
KEB + Club Membership)
2,00,000/- – is towards(Registration + Stamp duty)
Breakup of 49,11,500 is:
24,36,500/- – is towards component of undivided interests of Land AND
24,75,000/- – is towards Apartment and Other Facilities.

All disbursement details done by us through SBI Bank before JULY 2010
are given Below:
2-Jan-2010- 2,00,000/- Cheque was given.
17-Jan-2010- 3,00,000/- Cheque was given,
12-Mar-2010- 22,00,000/- Disbursed by XXX Bank
31-July-2010- 75,924/- Disbursed by XXX Bank
31-July-2010- 18,90,000/- Disbursed by XXX Bank

TOTAL Amount Paid to the Builder till Date - Rs 46,65,924/-
Note - , For the above PAID amount they Provided us all the INVOICES
which didn’t had any TIN/VAT Number( Has been enclosed herewith)…

I have already disbursed 46,65,924/- before JULY 2010 and now when I
ask them for Registration of FLAT the builder is asking me to pay 4%
VAT on 49,11,500 and 2.5% Service Tax on 49,11,500/- (This amount and
percentage is NOT being mentioned in my sale agreement) ,
i.e 6.5% of 49,11,500 comes around Rs 3,19,248/- according to builder.

Also Builder also charges me 2,19000/- as late payment – Disbursement
was delayed by bank to builder as there was no progress – Builder says
he can waive this off if I give him a letter saying I was having
financial problem – please advice

Builder asking me to pay VAT and ST amount as -
VAT and ST Amount of Rupees of 3,19,248 i.e 6.5% of Rs 49,11,500/-

I would Like to know few things –
1. Referring to Page 13 of my sale agreement , its an “Immovable”
property and according to the supreme court decision under section
(Raheja Development Decisions) I am NOT liable to pay any VAT and ST –
is this true? please clarify this as my FLAT was already ready when
we did our bookings(Till 5th Floor was already constructed, My Flat
is on 1st Floor).
2. Please suggest If I am Liable to Pay VAT and ST.
3. Builder also charges me 2,19000/- as late payment – Disbursement
was delayed by bank to builder as there was no progress – Builder says
he can waive this off if I give him a letter saying I was having
financial problem – please advice.
4. If I am Liable to pay VAT/ST under any section,Then let me know the
TAX calculation based on
a. Composition Tax – Under Section – 15 KVAT – I have verified with
TAX office the Builder is in this category.
b. Regular VAT method @ 12.5% – Based on the builder category, Still
I need input on this.
5. What should be the “Registration and Stamp Duty” amount to be paid
by me, Please let me know the calculation.
6. Any other Access amount which I/we may need to pay the govt. please
providing the detail calculation.
7. Also let me know if they have got Occupancy Certificate from BDA,
Else please guide me whom to approach for this.

Thanks

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
Follow

30 December 2011 Mr Author,
I will answer some of your queries,
1) Land cost is exempt from both VAT and ST. 2) The amount liable for vat,if any, will be on Rs24,75,000/-minus the amount charged for KEB ,BWSSB,parking and club membership.3)Tax should not be colleted(both vat and st) on sale of immoveable property.4) Mentioning the sale of flat in the agrement as immoveable property and not issuing a tax invoice(without TIN no,printed serial no,tax rate,total tax charged,address etc)while collecting each amount shows the builder is certainly not going to pay any of the taxes.5)If the dealer is registered under composition scheme then vat is payable @4% on Rs24,75,000/- minus the above inclusions in the price.Same way the ST @2.5% on the said amount.6)If the dealer is on VAT scheme VAT is payable @14% on around 60% of the basic price and ST is applicable on the ramaining 40%. 7) So, even if the dealer is paying tax under composition it is liable @4% on the basic price(say Rs22 lakhs)i.e.Rs88,000/- and the ST will be Rs55,000/-. The total tax liabilty will be Rs1,43,000/- only, and not Rs 3,19,248/- as quoted by the builder.8) Do not pay any taxes without proper tax invoices as specified earlier.Many builders in the city are avoiding taxes on apartment sales stating them as sold after construction.If it is sold after complete construction then no VAT and St are applicable.But registration charges will be high.Find out the regn charges from the web site of registration dept of GOK
MJK