Asked by your builder to pay five per cent as VAT for the flat you bought from him sometime between 2006 and 2010? Before you dig into your coffers and shell out the cash, make sure you actually owe him that amount.
MiD DAY had reported that over the last 15 days, builders across the state have been sending out notices to buyers, asking them to pay VAT (Bought a house in the past 6 years? Pay up!’ August 24). A note from the Sales Tax office said that while many builders are asking for five per cent of the agreement amount as VAT, calculations show that the tax may in reality amount to anything between one and three per cent, depending on the benefits claimed by the builder during construction.
However, most builders are demanding a blanket five per cent as VAT, even though they have taken advantage of the various rebates made available to them. According to the sales tax office, the builders can’t impose a blanket VAT of five per cent as that would amount extortion.
Chandrasekhar Soman, a consumer activist, said, “There are many housing societies that have directly received notices from builders, asking them to pay the five per cent VAT — the notices demand that the money be deposited within eight days of the receipt of the notice.”
Soman also claims that builders have warned buyers that they will take action against them if they don’t pay the taxes.
Meanwhile, consumer activists have urged homebuyers not to pay to the builders. “Generally, when such rules are imposed, the buyer is the one who suffers. We are urging every home buyer not to pay builders,” said Atul Puranik, another consumer activist, who recently formed a home-buyer’s association to boycott the implementation of VAT.
However, a builder said, “We had intimated home buyers that they might have to pay the VAT amount whenever it is implemented, so now if buyers decide not to pay, then the builder will have no option but to take action against buyers.”
According to the law, homes under construction that were sold between June 20, 2006 and March 31, 2010, have to be charged up to five per cent VAT.
There are no less than 10 lakh homes across the state that fall under this category.
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