17 November 2014
Is MVat @ 1% applicable on electricity, water charges, society formation charges etc that the builder charges from the flatowner over and above the consideration/ agreement amount? Am I as a flatowner liable? If yes, can I claim credit for it? If Yes, What document should I ask the builder to furnish me with? In the trade circular it is mentioned that these expenses will be allowed as a deduction to the builder if they are paid to the authorities. If the builder is getting a deduction from his MVat isn't he duty bound to transfer the credit to me. A swift reply would be highly appreciated.
Ideally you are not supposed to pay the VAT on the electricity charges etc. The allowability of the deduction is to the builder and not to the flat purchaser. Thus, you have to pay the VAT only on the consideration for the Flat and not the total amount. Also, you can argue with him, saying that VAT is charged on the sale of goods and society formation charges is not goods as such.
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