Vat on civil construction contract services

This query is : Resolved

CMA. RAJENDRA SONU THAKUR (Querist)
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24 October 2011 A contractor who constructs a construction on contract basis and he uses his own raw material as well labour. please advise me whether he will have to pay Vat on his billing under Maharashtra Value Added Tax Act, if yes, what is the rate of Vat.
Shall he avail vat credit on raw material purchases, similarly shall he get any deduction / abatment on his billing since he is a contractor and not a dealer.?

CA PRAVIN

CA PRAVIN (Expert)
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25 October 2011 If a contractor is engaged in construction of residential flats on his own land or purchased land then he is liable to pay vat @1%.

The Maharashtra government announced applicability of VAT on sale of all flat
registered after 1st April 2010 @ 1 percent of sale value under a composition scheme.
The fine print is as below. The detailed notification is awaited.
"As per the judgement delivered by the Hon’ble Supreme Court a few years ago,
VAT becomes leviable on the sale of construction material used in the construction of
flats. Many consumers and consumer organizations are demanding simplification in
computation of this tax. Having considered Amendments to VAT Act. Composition
having considered all the aspects of this demand, I hereby announce a simple
composition scheme for the builders and developers. Under this scheme, one percent
VAT would be payable on the contract price of flats mentioned in the agreement of
sale. However, such builders and developers will not be eligible for set off under the
VAT Act. This scheme shall come into force for the agreements registered after 1st
April 2010."

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