Builders and homeowners who bought their homes between 2006-10 got a temporary relief from the 5 per cent VAT imposed on them by the Sales Tax department, with the apex court extending the deadline for the payment to October 31 from the earlier date of August 31.
This brings some, if not much relief to the homeowners who now have two more months to get hold of the money they have to pay to the builders. The sales tax department earlier this month started sending notices to builders asking them to pay VAT up to 5 per cent on the sale of flats sold by them during the period June 2006-March 2010. The builder in turn passed the burden onto the buyers, asking them to cough up the amount.
The diktat from the sales tax department came after a raid conducted by them revealed that many builders have collected the money from their buyers but haven’t bothered to submit their collections with the department.
Yesterday, during the hearing of a Special Leave petition filed filed by the MCHI-CREDAI, the court held that the builders don’t have to pay the money on August 31, but have to shell out their dues by October 31. Builders are relieved that they now have two months more to file their dues. MCHI-CREDAI president, Paras Gundecha said, “This has come as relief for many home buyers and even for us. The buyers who had to make arrangements for large amounts of money suddenly will now have more time on their hands.”
Gundecha was then asked if the builders would charge less to the homebuyers, now that the court has relaxed interests up to 15 per cent. He replied, “Builders aren’t keeping anything with themselves, whatever they collect will be sent to the sales tax office.”
The court has also held that the builders would be refunded their collections with interest if the government loses the case in court. Builders however are yet to comment on whether they would in turn return the money to buyers who paid them.
Housing activists have protested the manner in which the builder burdens the end user with taxes that he is meant to pay. “Real estate is one of the most profitable businesses, where the profits margins are very high.
Still, builders are passing on the expense to the buyers. There is need for regulation – if tomorrow the builder is given back the money, who will ensure that it is returned to homeowners who paid the money to the builder?” said Simpreet Singh, coordinator of Ghar Banao, Ghar Bachao, a housing NGO.