VAT on under construction

Q: I’m planning to by an under-construction property in Pune. Previous owner had paid VAT on the flat, do I need to pay VAT again on same property?

CF User,

3rd December 2013

Legal in Pune

vat

vat on property

under construction property in pune

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Replies (4)

Hi,
I registered my flat in Pune in 2010.The contract or agreement price was once around 30lakh.Complete construct up area is around 950 sq feet. I admire to understand how so much VAT should I need to pay as per the Govt rule.

Gautam G,

22nd December 2015

Comment

The VAT amount is 1% of the contract/agreement price as on today. But if your agreement is registered before 31st March, 2010, then it is going to be 5%. That means you are going to become paying Rs. 1,50,000/- closer to VAT . It is a one time payment.

Rishi Dev,

22nd December 2015

Hi Neha,
Yes Service Tax and VAT is only for under construction property. But if you buy flat/ unit only after the builder obtains Certificate of Completion from the Competent Authority you need not have to pay any of them. In short purchase flat which is ready for possession.

you should ask the builder to provide you a break up of all the charges on a written document. For the payment of the service tax it is always advised to make a payment by check rather than cash, as it is accounted as white money and the white payments will be helpful for you from taxation point of view in future and when you will be planning to sell your property. Don't forget to ask your builder to provide you a receipt when you make him a payment by cheque.

Priyadarshini, Pune

5th August 2014

Comment

One more thing you should always keep in mind that when you buy a flat you buy two things from the builder 1. Undivided Land of Share and 2. The flat. Both VAT and Service Tax (As on Jan 2013 ...Service Tax @ 12.36% on 25% of BASIC Price ( if Land Cost is included ) otherwise 12.36% on 33% of Basic Sale price ) need to be paid on no 2 and not on no 1. Make sure you get a TAX invoice for those if builder is not giving you the TAX invoice then dont give those amount.....rest of the things as KTPCL+BWSSB + AMMENITIES are chnarged at 12.36% ....BUT Parking could not be chnarged for service tax as , as per SC decision Parking slot is not an extra service but the part of construction itself

Sneha Ambedkar, Pune

5th August 2014

Hello Sir ,

Please clarify on the VAT rules on underconstruction property in Bangalore

The property is under JDA with landowner . The builder is giving two agreement (1. Construction ,2. Sales) Could you clarify on the tax as below charger by builder and what is right amount -

By builder
1. VAT = {(Basic cost + Car parking +bescom/bass + club membership)*9.5}
2. Service TAx = {(Basic cost + car parking +,bescomm+ club+ maintenance + corpus fund)*25%*12.3}

Please clarify and suggest.If possible share the reference so that I can share with builder

Neha Gupta, Apartment Resident

28th July 2014

Comment

VAT is payable by the builder/ Developer @5% of the cost of construction only. It does not include the cost of land or payment to sub-contractors or service charges. The Supreme Court has directed that VAT is not payable if a fully constructed flat is sold to the flat purchaser as it would not amount to a works contract. As a common practice builders insist upon property buyers to pay the VAT that also on the total value of the house rather than just the construction cost, when the obligation to pay VAT is theirs only.

In the instant case when the VAT has already been paid by the previous owner, no subsequent payment of VAT is required because it is payable once only. Any demand to pay VAT again in such cases is unjust and unreasonable.

We are the legal advisors on real estate for Commonfloor.com and will be happy to provide you with the answer below. If you still have any questions/clarifications then kindly email us or call us and we will respond to you. It will be a paid service though.

Vakil Ji,

3rd December 2013

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