Refund from builder

This query is : Resolved

Prateek (Querist)
Follow

04 July 2015 I had booked a flat in 2014 April in Bangalore by paying booking amount along with its VAT and service tax. After 6 months builder sent me sale and construction agreement and since it was not agreeable for me I decided to cancel the flat without signing the agreement. Builder has refunded the principal amount, but not refunding VAT and ST. My concern is why have they paid tax without executing agreement with me? I have got nothing in return but ended up paying VAT and ST for no reason. Please help me to understand on how can I get a refund on VAT and ST?

Anoop N S

Anoop N S (Expert)
Follow

04 July 2015 Have you received the tax invoice

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
Follow

20 July 2025 This is a common issue in real estate transactions. Here’s a breakdown of the situation and possible steps you can take:

Understanding the Issue:
VAT and Service Tax on Booking Amount:
When you paid the booking amount, the builder likely deposited VAT and Service Tax on that amount as per applicable laws, even before the formal sale/construction agreement was executed.
Why Tax Paid Without Agreement?
Tax authorities consider the booking amount as a part of the taxable transaction or advance payment. Hence, VAT and Service Tax are payable regardless of whether the agreement was signed later or not.
Your Refund Claim:
Since you canceled before signing the sale agreement, you got the principal back but the tax portion paid by builder is usually not refundable to you automatically because tax was deposited by the builder to the government.
Can You Claim VAT and Service Tax Refund?
VAT:
Usually, VAT paid on the booking amount is part of the builder’s tax liability, and they deposit it based on the booking receipt. Since no sale happened, ideally the builder should have claimed input tax credit or adjusted it in their returns.
You, as a buyer, are not directly entitled to a VAT refund because VAT is a tax on the seller.
Service Tax:
Service tax (now subsumed under GST, but for your case, service tax applies) is also paid by the builder for the services they render (construction, booking). Again, it’s the builder’s liability to adjust or claim refund from tax authorities, not the buyer’s.
What Can You Do?
Check Agreement & Booking Terms:
Review the booking receipt and any terms regarding refund of taxes.
Request Builder for Refund or Adjustment:
Since you didn’t execute the agreement, formally write to builder requesting refund of VAT and Service Tax portion.
Sometimes builders agree to refund these amounts or adjust in case of future booking.
Legal Recourse:
If builder refuses, you may approach consumer court or real estate regulatory authority (RERA) for relief.
Check if your booking cancellation letter is acknowledged and note any terms about taxes.
Tax Authorities’ Role:
Generally, the buyer cannot directly claim VAT or service tax refund unless the tax was wrongly collected from you.
You can confirm with your local VAT department or GST authorities about any provisions.
Summary:
The taxes are paid by builder on your booking amount to tax authorities.
You received refund of principal amount, but VAT/ST portion was not refunded as taxes are considered paid by builder.
You can request builder for refund but it’s not guaranteed.
Legal action or RERA complaint may help if builder is uncooperative.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now