Vat calculation & payment to builder

This query is : Resolved

CA Rohan (Querist)
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22 October 2012 I got the letter from builder to pay the VAT portion @ 2.81% in September 2012, for the flat purchased in 2009 (under construction), possession given in July 2012. VAT issue was informed to us at the time of purchase.

1) In his calculation given below, he has calculated VAT @ 4% & 12.5% .
2) Following is the calculation:
Gross Receipt (after deduction of land cost Rs.37153787) Rs. 242488134 without any deductions in respect of sub contracts expenses & thereafter deducted standard deduction of 30% from the above figure to arrive at the taxable figure of Rs. 169741694. Tax is calculated at 4% - Rs. 4374113.00 & 12.5% - Rs. 6223862 & deducted set off Rs. 2743097, net tax - Rs. 7854878.00 (2.81%) - not able to identify how the % has been taken out?

Queries are as follows:
1)a) How is the VAT calculated without any expenses incurred (on the basis of gross receipts)?
b) Builder has not taken into consideration the expenses incurred through sub contract works?
2) Can builder collect the tax without providing raising an invoice for VAT collected? (Note that builder is giving us the receipt for collection of tax)
3) Builder has to take into consideration the VAT input credit while arriving at the vat taxable portion

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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23 October 2012 Mr Rohan,
Iam in doubt on some matters. You say the gross rceipt(after deduction of land cost Rs3,71,53,787-)Rs24,24,88,134-. This is for how many flats.Here land cost is not only cost of purchasing land/site. The development expenses also should be added to it.Therefore land cost generally comes to around 30-40% of the total price.Secondly the charges made for amenities like club house,swimming pool,security,24X7 water supply,charges paid to electrical and water suply departments,gym and other sports facilities are not liable for vat. This comes to 10-15% of the price. So,about 50-55% of the total recipts are not liable for vat.On the balance 4% VAT,if under composition scheme,or 12.5% on 70% of the construction cost.In this case,as per the figures given by you,the total recipts is Rs27,96,41.921-.The construction cost may be around Rs13,50,00,000-only. VAT liability @4% is Rs54,00,000-,Which is 1.9%.If it is under regular scheme it 12.5%on Rs9,45,00,000- i.e.Rs1,18,12,500- i.e. around 4.2% of the total price. Most of the builders pay vat under composition scheme only.Flat buyers are not linked to deuctions available on sub-contractor payments and input tax credits. While collecting VAT the bilders should issue a tax invoice.Receipts are not enough.....MJK

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