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VAT tussle between builders, flat owners continues
December, 10th 2012

Builders and flat purchasers are at loggerheads over the payment of Value Added Tax (VAT) with the former threatening to encash the cheques they had collected earlier.

While purchasers are asking the builders to return the advance VAT cheque collected at the rate of 5%, builders

are refusing to let go of the amount.
Suresh Vaity, who purchased a Kandivli flat for Rs. 40 lakh was asked by the builder to give a cheque of Rs2 lakh advance as VAT (5% of the agreement value).

I was forced as the builder was not ready to give possession of my houses till I cleared all my dues. However now I want the refund, since I was overcharged, said Vaity.

The Sales tax department has made it clear that VAT is charged on the materials used for construction and excludes land price and hence comes to 1.5 to 3.5% of the total value of the apartment.

It was under duress that most of the flat owners paid and with things becoming clearer, the builders need to refund the excess amount, said Advocate Vinod Sampat who deals with property issues. He clarified that the purchasers would not be liable if the cheques bounce.

Builders meanwhile have blamed the state for the impasse. We are caught between the state and consumers. It is not fair to tax us if the consumers do not pay up, said Anand Gupta, Secretary, Builders Association of India (BAI), an apex body of the construction industry. However he agreed that excess amount should be refunded.

Sales tax officers have washed off their hands over the issue. It is between the builders and buyers and does not concern us, said a senior Sales Tax officer who declined to be identified.

However there have been instances where the buyers and builders have negotiated a settlement.

We managed to save at least Rs. 64,000 per flat owner as we held talks with our builder and he charged as per the law, said Suresh Salunke, who resides at Unnati Woods, Thane which was contructed by the Raunak Builders.

Similarly, Hiranandani Group also refunded the excess amount they had collected from the consumers.

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