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Bought flat with black money? Pay more VAT

Monday, 29 October 2012 - 8:30am IST | Place: Mumbai | Agency: dna

Builders seek 5% tax from those who paid in black, 2-3% from the rest.

Developers are applying different rules to different buyers with regard to value added tax (VAT). Those who bought flats by paying some of its value in black have been asked to pay 5% VAT while those who paid in white or by cheque are being asked to pay 2-3% VAT. October 31, Wednesday, is the last day to pay this tax. The amount varies from developer to developer but it cannot exceed 5%.

With the deadline round the corner, developers are pressurising buyers to pay VAT as per the rates they determine or be served with a penalty or breach of agreement notice. Needless to say, flat buyers are a harassed lot.

“While buying property, developers insist on a black money component to reduce the value of the flat. Because of this, developers avoid paying high taxes. They use the unaccounted black money to bribe officials and buy material needed for construction (sand, bricks, etc) from the black market. It’s unfair that they are now charging VAT differently for different buyers,” said a resident of a prominent housing society in the western suburbs.

Residents of Lakhani cooperative housing society in Belapaur were shocked when they got notices from their developer. “He has sent two different notices, saying 5% VAT for those who bought flats with black money and 3% for those who paid in white. This is unfair. How can he levy different VAT amounts in the same society? There are several loopholes in the law and developers are exploiting those for their benefit,” a resident told DNA on condition of anonymity.

Manohar Shroff, general secretary of the Maharashtra Chamber of Housing Industry, Navi Mumbai, admits that it is wrong to levy different VAT percentages in the same society. “The residents of such housing societies should approach the concerned developers’ housing body. Once that is done, we will call the developer and aggrieved buyers and try to resolve the matter amicably,” he said, insisting that the complaint must be registered with them.

Real estate experts said developers are doing this because if they don’t charge 5% from those who have paid in black, they will have to shell out the money from their own pockets. “When there is a profit, developers are the first to reap its benefits. Now that there is a loss, they want to recover it from buyers by misusing the agreement clause,” said a real estate expert.

Advocate Mahendra Sandhavshiv said those who have paid in black are being punished twice. “The payment in black lowers their home loan amount seeking eligibility. Now, they have been asked to pay more as tax. The government is responsible for this,” he said.

A city-based developer said they are victims of the system. “We are forced to buy land by paying a huge amount as black money to local land holders. We have to recover this amount from somewhere. Whom should we blame? We have no choice but to recover it from buyers,” he said.

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