The  sales tax department is assessing the sale of flats in over 400 building projects which are under construction in Mumbai.

A senior sales tax official said assessment notices had been issued to private developers carrying out the construction. The department wants to know from the developer how many flats have been sold in under-construction properties. The sale records will be later scrutinized by the department.

The state government introduced a new composition scheme in the state budget earlier this year. Under the scheme flat sales in an under-construction property (before issuance of completion certificate) would attract a service tax of 1% of the agreement value of the transaction. While the new regime is applicable to all under-construction flats/units sold after June 20, 2006 (date on which transfer of under-construction property was brought under the ambit of value added tax), sales tax officials said that assessment notices had not been issued to all concerned private developers.

The Maharashtra Chamber of Housing Industry (MCHI) , a leading association of builders, challenged the decision to levy the tax on under-construction property in the Bombay high court. "As the court is yet to order a final decision in this regard, assessment notices have been issued only to non-MCHI members," a senior sales tax official said. The court, while hearing the petition, absolved MCHI members from registration and assessment under the scheme, till the disposal of the case.

However relief has not been extended to non-MCHI members , whose sales records are now being scrutinized . " Only a handful of developers had availed the scheme following the notices. The department has so far collected nearly Rs one crore in tax from few developers. Some others have sought details regarding the composition scheme stating they were willing to comply, while others have sought protection quoting the court relief for MCHI members," the senior official added.

Meanwhile MCHI members have been spared the assessment headache. During the pendency of the petition, the department however has sought information on flat sales in projects undertaken by them.