VAT and Service Tax demand from Builder

Q: Shocked to receive a demand of Rs.5 Lakhs (Approx) towards VAT and Service Tax. This includes interest of Rs.1.5 Lakhs (Approx) for delayed payment of VAT.
Questions;

1) How the builders have calculated the demand of VAT & Service Tax?

2) Have the Input Credits available to the builder for the materials bought by them with VAT and used in the construction of the building been set off against the demand of VAT?

3) Delay in giving the possession of the flats by the builder should not penalize the owners on account of interest and penalties?

4) Delay in giving the possession of the flats by the builders is already causing lot of interest burden on the owners who have taken the loans.

Builders should be responsible for compensation of the interest loss and consequential losses arising out of delayed possession.

-- T. L. Jain, Flat No.1403, "B" Wing.

T L Jain, Apartment Resident, Mumbai

23rd October 2012

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Replies (6)

Further, we all should also understand the following ;-
1) VAT is builder's liability and there are legal positions suggesting that it is not chargeable by them.
2) Matter is still undecided and liability is yet not conclusive.
3) This is on account payment till fully assessed and therefore the share should be equal as Builder is responsible as primary assesee.
4) Builder can pass on the conclusive tax or levy but not on account payment.
5) Builder is yet to give full working . They cannot provide till it is assessed in toto. ( Till His Return is accepted )
6) We have no proof that it is paid by builder.
7)Our undertaking is with them we cannot pay full till it is discharged.

T L Jain, Apartment Resident, Mumbai

15th November 2012

Comment

I have come across certain cases where the Builders have been forced by the Members to bring down the demand of VAT at less than 50% on the grounds of Input Credit which can be availed by the Builders on account of the construction material bought by them after payment of VAT. For this purpose, Builders have to provide the claculation of the VAT amount being demanded from the Members. In case of HDIL, I believe that no such calculations have been provided to the Members.

T L Jain, Apartment Resident, Mumbai

15th November 2012

Comment

As per my knowledge, both vat and service tax has to be calulated on the basic amount, you cant charge a tax on the tax and you cant charge VAT on the service tax. So it has to be basis amount only.

Sankalp, Mumbai

15th November 2012

Comment

what is the legal opinion here ? this sounds very unreasonable & what if we dont pay it ?

Kamaal, Mumbai

27th October 2012

Comment

I understand legally it is the liability of the builders. Question is if the builder is asking the flat owners to bear this liability, he should provide full break down of the amount being demanded and the additional liabilities arising out of delay in executing and completing the project should be born by the builders. If we don't pay, this will be a disputed issue between the flat owner and the builders. As per the demand letter sent by the builders, they have threatned that if the flat owners don't pay this demand, they (builders) have the right to terminate the Agreement. I don't know what is the legal position in this regard. For other connected issues please refer to my replies to Mr.Sankalp & Mr.Dhiraj who are participating in this debate.

T L Jain, Apartment Resident, Mumbai

29th October 2012

Everyone is receiving demand letters.. and it is mandatory to pay..in which apartment do you own the flat?

Dhiraj,

23rd October 2012

Comment

1403 - 'B' Wing. I know it is mandatory but why the owners should suffer for panelties and interest due to delay caused by the builders in completing the project. Moreover the demand letter does not give any details of the computation of the principle amount of VAT and also the interest and the panelty. As i mentioned earlier, the builders are entitled to claim the Input credits in respect of materials procured after payment of VAT which is used for the construction of the project. I don't know whether such Input credit has been fully availed by the builders? If yes, whether the same in full is being passed on to the flat owners?

T L Jain, Apartment Resident, Mumbai

29th October 2012

This is a very big sum of money.. How about other flat owners? Have they all received the same tax and fine?

Sankalp, Mumbai

23rd October 2012

Comment

I don't know about the status of other flat owners but informally i understand that Sales office, HDIL that similar demands have been sent to other flat owners and some of them have already paid. Are you also a flat owner in Metropolis? If yes, how about any demand on you? I don't know what position is being taken by the Association of Flat Owners of Metropolis, recentely formed, in this regard?

T L Jain, Apartment Resident, Mumbai

29th October 2012

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