MUMBAI
Developers ‘misuse’ clause in agreement to make them pay 5% tax.
Flat buyers are accusing developers of misusing the property agreement and demanding 5% value added tax (VAT) from buyers who have bought flats that are ready for possession between 2006 and 2008.
“Our developer sent us two VAT notices, demanding Rs2.64 lakh in August and now Rs2.24 lakh in September. He manipulated the clause which states the flat buyer is liable to pay any taxes levied by the government even though the flat is bought after completion of construction,” said a buyer who bought a 2,000sqft flat, ready for possession, in 2008.
He added that while developers continue to demand VAT, the government tells buyers not to pay VAT for flats that are ready for possession. “We are really confused. The government needs to throw some clarity on this subject,” he said.
According to the Maharashtra Value Added Tax rule 2005, developers are not allowed to charge VAT on such flats, but developers ignore this and demand the tax anyway by taking advantage of a clause in the property agreement.
The clause states: The purchaser/s shall be liable to pay all or any other taxes such as service tax, VAT, sales tax and other taxes as are or as may be levied by the state or central government or any other authority before or after taking possession of the said unit.
“This clause is always part of any property agreement copy. And most developers frequently misuse it,” said realty experts. Manohar Shroff, the managing director of the Shivam Group, said that calculating VAT is difficult. “Everyone calculates it differently and comes up with a different figure each time. The government should simplify the matter for the larger interest of the people,” he said.
Shailesh Puranik, the managing director of Puranik Developers, said that each developer adds his own clauses in an agreement, complicating things further.
“However, if any of them charge VAT on ready for possession buildings, then it is a grave offence. The VAT issue is not only confusing the buyers, but us (developers) also,” he said.
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