HC to give verdict on VAT today

Mumbai: The Bombay high court is scheduled to deliver its verdict on the Maharashtra government's decision to charge value-added tax (VAT) on under-construction buildings between 2006 and 2010 on Tuesday, a day before the deadline for developers to pay the levy ends. 

    "Ultimately, the burden will be on the middle-class tax payers or buyer of flats," said a division bench of Justice D Y Chandrachud and Justice Rajesh Ketkar. The bench will start hearing the case at 9.30am, one-and-a-half hours before the court opens at 11am. 
    The court is hearing a bunch of petitions filed by the Maharashtra Chamber of Housing Industry-Confederation of Real Estate Developers Association of India (MCHICredai), the representative body of builders in the state, along with the Pune-based Marathi Bandkam. An PIL has also been filed by Grahak Hitawardhini, a Pune-based consumer organization. 
    The petitioners have questioned if the sale of flats constitutes a work contract. They have also claimed that the VAT of 5% and 1% for flats purchased from 2006 to 2010 and post-2010 respectively was against the law, as it included the cost of land, which was an immovable property.Mhada flats do not attract VAT: Tax, legal experts 
Mumbai: Buyers who purchased under-construction Mhada flats in the past six years may not have to pay the value added tax (VAT). 
    Legal and tax consultants have told Mhada that its projects do not attract VAT. The reason: Unlike in private transactions, Mhada does not enter into any sale agreement with its buyers. Mhada issues allotment letter to buyers after it has received the entire flat cost in maximum three installments. 
    The law states that builders will have to pay a 5% VAT on sale of properties between 2006 and 2010. The VAT post 2010 will be 1% of the cost of the property. 
    "In private transactions, a developer enters into an agreement to sale with the buyer after receiving a certain amount of the total flat cost of the under-construction flat. A sale deed is registered after the full flat cost is paid," said a Mhada official. 
    Mhada, however, is still playing cautious. "Though we are firm in our view and believe our buyers, majority from the middle class, should not be taxed. The sales tax department has not sent any notice to us for VAT payment," the official added. 
    "We are focusing on private developers. We do, however, believeMhada and Cidco will have to pay VAT," said a tax official. Tanaji Satre, Cidco vice-chairman, said prima facie he believes VAT is not applicable on them, but he has to check.