Media professional George Kuruvilla was shocked when he received a letter from his builder last weekend asking Rs2.5 lakh for a flat he had bought in Bhandup in 2007.
Media professional George Kuruvilla was shocked when he received a letter from his builder last weekend asking Rs2.5 lakh for a flat he had bought in Bhandup in 2007.
“The notice said the payment was due on account of VAT, payable to the government of Maharashtra,” said Kuruvilla.
“Paying the high-interest EMIs and the steep monthly maintenance bill is bad enough. The VAT dues are the last straw.”
Kuruvilla is among lakhs of buyers across the city who are being sent VAT notices by developers, following a ruling by the Bombay high court last week. It was in response to a plea by the builders against the imposition of VAT of 5% of the agreement value by the state government. The state government also issued a fresh circular to developers asking them to pay up the VAT outstanding.
The VAT is payable with retrospective effect for every sale since 2006, for flats, shops and bungalows sold between June 20, 2006 and March 31, 2010.
“Though the state subsequently reduced VAT on sale of flats to 1% from April 1, 2010, it is still levying VAT at the rate of 5% for all agreements between 2006 and 2010, throwing thousands of buyers into a fresh financial crunch,” said a leading developer.
The developer added that the VAT blow is not only a burden for home buyers, but also a dampener for developers who are struggling to offload their existing stocks.
Though MCHI-CREDAI and CREDAI-Pune Metro have moved the Supreme Court with a special leave petition, for now, developers are collecting the VAT dues from their buyers. While some of the developers did take the VAT payments at the time of executing the deal and deposited the amount in an escrow account, others entered conditional agreements and are now recovering the dues.
“Every buyer will not only have to pay the 5% VAT, but also interest at the rate of 15% and penal interest at the rate of 25% for the period due. This news has rattled buyers who are already reeling under the pressure of 3.09% service tax imposed by the central government,” said Atul Puranik of Centre for Fair Business Practices.
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