CA Kumar Sankalp (CA) (32 Points)
23 May 2011Hello Friends,
I have a query regarding VAT on builders.
IS VAT APPLICABLE ON BUILDERS?
I have been doing audit of a builder for past 3 years.Recently they have received a notice from the Sales Tax Department regarding a demand of VAT liability on the sales.Now,being an immovable property no Vat liability should be imposed.The assessee is in UP
I would like to have your views on this topic,and if VAT is imposable what are the logical reason?
MJ Krishnamurthy
(ACCT(Retd))
(7197 Points)
Replied 23 May 2011
Dear Friends:
In the case of builder VAT is applicable subject to the way in which payment for sale of apartments is received and an agreement is made for the same purpose.Generally builders do not finance their construction project from their own sources. They initially own the land on which an apartment building is planned to be built up.Prepare a plan,estimate the cost,for contractors and for each apartment,obtain approval from concerned local authority and make publicity of it. this publicity is both for intending buyers of built houses and for awarding contracts.In this process if money is aaccepted before completing the construction work,by showing papers pertaining to plan and approval etc, with or without any agreement ,then the transaction between the builder and the buyer becomes a work contract and such receipts are taxable as per relevant rules in each State.
If,on the otherhand,the builder makes a project out of his own funds, and sells the apartments after completing them ,then it becomes a transaction of sale of immovable property and the VAT laws in any State are nott applicable. Because the immovable propeties are not goods as per Sale of Goods Ac and the VAT law in India.
Cases decided by the Courts in the case of M/s Mittal Investment Corporation Vs Ad Com of CT Karnataka & M/s Raheja Builders may be refered to.
MJ Krishnamurthy
RAJ
(MANAGING PARTNER)
(22 Points)
Replied 23 September 2011
SIR - I HAVE PLANNED TO START MY BUSINESS (FLAT PROMOTING) - AROUND 5-6 FLATS IN A GROUND , PL SUGGEST ME ITS APPLICABLE TO PAY SALES TAX / VAT / TIN REG- PL GUIDE ME REG THIS -
CA. Kanhaiyalal Gupta
(Taxation Incharge)
(93 Points)
Replied 24 September 2011
agree with krishnmurthy ji
Hiren
(Asst. Manegers)
(139 Points)
Replied 25 June 2012
Krishnamurthyji thanking You ,
i went to now from which yrs MVAT is Taxable for Builders in case above condition is satisfited
ANUJ CHANANIA
(ASST MANAGER ACCOUNTS )
(21 Points)
Replied 06 September 2012
Dear All,
As per the recent supreme court interim order vat is payable on sales of flats but by 31.10.2012 instead of 31.08.2012. But it has not yet been clarified whether VAT has to be paid by Builder or Flat Owner .Please clarify. As per the news from newpapers Vat is to be paid @ maximum 2 % & not 5 % as declared by Builders in their Demand Notices .
Regards,
Anuj
CAclubindia
