Builder asking for vat

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undisclosed (Querist)
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26 May 2014 Hi,

I booked an apartment in Chennai on Aug-2013 (expected possession Nov-2015).

Agreement with builder says that any future tax or government fee is needs to be borne by me.

Builder is sent me to letter to pay 2% 'addition development fee'. When I asked him on phone about it, he told me that it is VAT.

My questions:
1. Who should pay VAT - builder or me?
2. If builder is suppose to pay VAT, can he ask me to pay it as 'additional development fee' (nothing of this sort is written on agreement)?
3. Can I refuse to pay 'addition development fee' and ask him to provide demand letter of VAT? If I ask him to provide it, will he provide me that? Can he create trouble for giving possession of property if i refuse to pay this amount?

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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27 May 2014 Mr Author,
A builder can collect tax(VAT) from flat purchasers.If he has opted for composition of tax scheme he has to pay a flat rate of 4% or 5%(in some states) on the gross receipts related to construction cost by himself without collecting from customers. This excludes land cost(30-40%)and other charges for deposit to electricity,water connection,additional amenities,etc.Collecting VAT in some other name like development charges is not allowed.Mostly they will not pay it to the govt.
Yes,they can create some problem in handing over the apartment. You may have to go to Court. Try to bargain.....mjk

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