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Clear VAT dues by end of October: Supreme Court
September, 04th 2012

Real estate companies in Maharashtra have almost turned into collection agents, as they rush to comply with a Supreme Court directive to clear value added tax dues by the end of October.

Anyone who bought a home in Maharashtra since 2006 is now being hounded by the developer of their apartment for more money, all thanks to the Supreme Court ruling last week regarding the imposition of VAT. With companies having till the 31st of October to clear their VAT dues, some had hoped that builders would negotiate with the state governments. But that is not happening. Experts say realty firms have decided to play ball because the VAT imposition is not a new ruling, only a pending legal matter, which, with the backing of the Supreme Court can not be negotiated.

Keki Mistry, vice chairman & CEO of HDFC said, This was expected because the hike came in about two-three years ago. It is just that it has been referred to a court. The court has given its decision.

A lot of properties, when the building was delivered, the VAT was collected. For example, I bought my first property recently and I have paid by VAT but of course this varies from developer to developer, Mistry further added.

Companies say most agreements have been drawn up with the provision that any additional costs must be borne by the customer. However, companies are finding it tough to collect the dues because quite a few of the homes originally sold in 2006 and thereafter have already been resold. In these cases, the companies are readying to bear the cost themselves.

Consumer forums continue to voice their objection to the imposition of vat, but the Supreme Court decision may mean their protests are in vain. But analysts are turning watchful. Real estate companies that have decided to bear the additional charge on their books will have a tough quarter. But given that most of the period between 2006 and now has been sluggish for the sector, real estate companies may not be on shaky ground.

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