In a recent judgment issued by the Supreme Court, home buyers who buy under construction flats should pay VAT and the ruling says, the sales of under-construction flats include works contract in the builder-buyer agreement.
In particular the state government of Maharashtra and Karnataka will levy Value Added Tax (VAT) on the builders for their under-construction properties. Though, the Supreme Court judgment says that builders to be charged with VAT, it is evident that finally the buyers have to bear the cost. Builders, who have already paid the VAT levies, will not be inflicted with any interest or penalty. On the other hand, builders who have submitted ‘Special Leave Petition’ to evade the VAT charges should have to make their VAT payments. This may upset the capital of the industry and the capacity of the builders to make such payments.
Owing to the VAT infliction, the buyers who didn’t pay VAT previously will have to face the additional cost in case if the builder have included any applicable section in the under construction agreement to get rid of the VAT charges. The state and central government is likely to allow concessions or exemptions imposed on a certain type of small residential projects in order to defend the lower middle class segment from hefty VAT burdens.
There are few facets of state VAT in favor of the builders and home buyers like the option of appealing the state VAT contribution credits to decrease the gross VAT levies and few state VAT offers easy schemes to pay the VAT dues. However, this judgment of Supreme Court to pay extra VAT has the real estate sector more intricate by challenging the task of managing funds and completion of projects.
In particular the state government of Maharashtra and Karnataka will levy Value Added Tax (VAT) on the builders for their under-construction properties. Though, the Supreme Court judgment says that builders to be charged with VAT, it is evident that finally the buyers have to bear the cost. Builders, who have already paid the VAT levies, will not be inflicted with any interest or penalty. On the other hand, builders who have submitted ‘Special Leave Petition’ to evade the VAT charges should have to make their VAT payments. This may upset the capital of the industry and the capacity of the builders to make such payments.
Owing to the VAT infliction, the buyers who didn’t pay VAT previously will have to face the additional cost in case if the builder have included any applicable section in the under construction agreement to get rid of the VAT charges. The state and central government is likely to allow concessions or exemptions imposed on a certain type of small residential projects in order to defend the lower middle class segment from hefty VAT burdens.
There are few facets of state VAT in favor of the builders and home buyers like the option of appealing the state VAT contribution credits to decrease the gross VAT levies and few state VAT offers easy schemes to pay the VAT dues. However, this judgment of Supreme Court to pay extra VAT has the real estate sector more intricate by challenging the task of managing funds and completion of projects.
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