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Bought a house in past 6 years? Pay up!

Buying a home in Mumbai is a dream that many struggle to realise. However, for many who have bought their homes between the years 2006 and 2010, the dream has come back to haunt them.


Representation Pic

Builders have now decided to send notices to home-owners who bought flats between June 2006 and March 2010, asking them to pay 5 per cent as VAT on the total agreement value for their homes.

To add insult to injury, the buyer will have to shell out the money to the builder by August 31, which is days away. The taxation is not applicable for resold apartments. VAT has been levied only on flats sold by builders to buyers.

For instance, a buyer who paid Rs 5 crore for a flat in the year 2006 will have to give the builder Rs 25 lakh as VAT, within seven days. Builders complained that the circular issued by the state government is unjust, and will affect most of the house buyers in Mumbai and the state.

Rajesh Prajapati, president, MCHI Raigad, said, “This policy would affect lakhs of home buyers. People are already reeling under the growing inflation, and now this.”

Flats sold after April 2010 will be charged only 1 per cent VAT on the agreement value. Paras Gundecha, the president of MCHI Mumbai said that it would be a near-impossible task for builders to collect the money before August 31 from buyers and submit it with the government.

“The government isn’t doing justice to home buyers. How do they expect us to collect the money all of a sudden? If the government plans to charge 1 per cent for houses sold after April 2010, then why not plan the same for the homes sold between 2006 and 2010? We are sending notices to buyers, because we have to collect money from them,” he said.

Builders claim that a maximum number of homes were sold between 2006 and 2010, when prices were at an all-time high. “Many flats that were sold during in those four-five years.

So it’s a huge task for builders to collect the money from buyers within such a short span of time and then submit it,” said a builder. A senior sales tax officer who was involved in recent raids at several builders’ offices said that the circular was issued after the raids revealed that many builders had already collected the tax from buyers.

“In the raid, we came to know that many builders had collected the taxes, but didn’t deposit it in the state treasury. Hence the department has become strict now and is planning to collect all the money,” he said, requesting anonymity.

Another senior officer claimed that the department is expecting to receive between Rs 800-900 crore. “The taxes will go up to a few hundred crores. The builders were always aware of it, but were delaying the matter. Now they will have to pay the taxes with 15 per cent interest every year and 25 per cent as penalty for delay.”  

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