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Kvat under works contract for builders and developers

shashikant (Employed ) (170 Points)

30 April 2013

Hi....

Please let me know about KVAT under Works Contractor for Builders and Developers.

Thanks

Shashikant

Bangalore

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4 Replies

MJ Krishnamurthy (ACCT(Retd)) (7197 Points)
Replied 30 April 2013

Mr Sashikant,

Onder composition scheme it is 4% and VAT scheme it is 14.5% on the entire transfer of property value. This is arrived also by deducting 30% from the total receipts. In the case of builders of apartments they deduct, initially 40% towards land cost and then 30% for labour and expenses......mjk

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sanket (proprietor) (24 Points)
Replied 31 March 2014

What if the builder sells the flat after obtaining the completion / occupancy certificate, under kvat? Who is authorised to issue oc / cc in this regard. Thank you

MJ Krishnamurthy (ACCT(Retd)) (7197 Points)
Replied 01 April 2014

Mr Sanket,

If you buy a flat after completion of its construction no vat or ST is payable.The completion of construction is determined by the occupancy certificate issued by the concerned local body i.e BBMP,Grampanchayat,or BDA .BDA or BBMP is supposed to issue this certificate to all building constructed in its area after an inspection by its plan approving engineers. In the case of an apartment brought up outside BBMP or BDA area,then the concerned Gram pachyat ha sto authorise an architect or engineer to submit a report on the aprtment and decide to issue an OC accordingly.

As per a supreme court judgment in a case Viz : L&T Ltd Vs Govt of Kar,(in Aug 13)if some advance is paid to the builder before finishing the construction work, by a buyer ,then the vat and ST liability arises on the unfinished part of construction.Here,it is very difficult to determine authoritatively the quantum of construction still left(in%) when a buyer entered into an agrement with a builder. But this principle has not been adopted by the govt and necessary instructions are not issued ,so far.Some builder tsry to collect VAT and ST,in full, from their customers even after completing the construction work,which is wrong.........mjk

Akshay Garg (Indirect tax trainee) (457 Points)
Replied 02 April 2014

In respect of Haryana VAT in case of a trading concern if the output tax is less than input tax whether the Input Tax Credit has to be reversal to the extent the output tax liability is less than the input tax credit.