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Buyers in Mumbai refuse to pay VAT, ready for slugfest in court
October, 20th 2012

Flat owners have decided to take the bull by its horns. Those who have received notices from builders to pay value added tax (VAT) told DNA that they will ignore such threats. What if the developer drags them to court? We will give a fitting reply in court. We do not want to answer such extortion-type letters where they are using vague clauses mentioned in the agreement to extort money from us, said Dinesh Sharma, who bought a 3BHK flat from Lodha Developers in 2009.

DNA reported last week that people who bought flats between 2006 and 2010 will have to pay 2% to 4.5% as VAT compared to the earlier 0.5% to 3%. Sharma says since then, many buyers have sold their flats. So, who is entitled to pay VAT? The original buyer does not exist. It is confusing. Those who are staying in flats are being victimised. It is not right, he lamented.

Thane resident Ramesh Patil was shocked when he received a letter from Kalpataru developers, asking him to pay Rs3 lakh as VAT within a week.

It is difficult to raise so much money in a short period. The developers think buyers have a fat bank balance like them. Everyone, including the government, is trying to squeeze money from us. I have decided not to pay VAT and meet the developer in court if he drags the matter there, he said. I got possession of the flat in 2009. Had I not got it, the developer may have created hurdles while handing over the keys of the flat.

Patil is confident that the VAT case wont stand in court. As per the sales tax department, VAT is the liability of developers, not buyers. The developer may show an agreement clause which says he is eligible to charge us for any unforeseen taxes levied by the state and central governments. Well see if the court gives importance to the government circular or the developers argument, he said.

Some developers have decided not to be harsh with buyers on VAT.For the time being, we will pay VAT on behalf of the buyers. We have to pay VAT by the end of this month and so, if they agree to pay, we will recover it from them. We wont use coercive tactics against those who do not want to pay. It will lead to skirmishes and tarnish our image, said a prominent city developer on condition of anonymity.

Arvind Goel, president of the Maharashtra Chamber of Housing Industry, Navi Mumbai, agrees. Most of my initial buyers have resold their flats. I do not know where they are now. I do not have the mechanism to find where they are in our vast country. Therefore, to avoid confusion and arguments, I have paid VAT from my pocket. I am not sure if I will able to recover it, he said.

Anand Patvardhan, former president of the Consumer Forum, said the government has no right to recover VAT. Any case in connection with VAT will not stand in court. VAT is based on the sale ofgoods and should be recovered while buying construction material. The present VAT is turning out to be income tax. The state government has no right to recover income either from developers or buyers. It should be quashed as early as possible to end the loot by developers on behalf of the government, he said.

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