Vat on property buying
This query is : Resolved
27 April 2012
Hi,
I have bought an underconstruction flat in Thane. Registration was done in Aug 2009. Builder is now giving possession but he is charging me 5% VAT.
According to my knowledge VAT is applicable only for those flats which were registered after 1st April 2010 @ 1% rate.
Can some one pls clarify..
I have bought an underconstruction flat in Thane. Registration was done in Aug 2009. Builder is now giving possession but he is charging me 5% VAT.
According to my knowledge VAT is applicable only for those flats which were registered after 1st April 2010 @ 1% rate.
Can some one pls clarify..
28 April 2012
Mr Shirish,
You bought a flat during its construction,so,it is like entering into works contract agreement with the builder. Then it attracts wct tax @5%, the composition rate. Here they should not charge tax on the land cost,which will be around 30-40% of the total cost. Furhter, he should issue an invoice on sale of flat showing collection of vat @5%.Please take care of these points....MJK
You bought a flat during its construction,so,it is like entering into works contract agreement with the builder. Then it attracts wct tax @5%, the composition rate. Here they should not charge tax on the land cost,which will be around 30-40% of the total cost. Furhter, he should issue an invoice on sale of flat showing collection of vat @5%.Please take care of these points....MJK
30 April 2012
Thanks for the revert.
But under this scheme, isn't Builder expected to get more than 4% set off? So ideally he should not charge me more than 1%
Is it correct?
But under this scheme, isn't Builder expected to get more than 4% set off? So ideally he should not charge me more than 1%
Is it correct?
02 August 2025
Here’s a clear explanation based on your scenario of buying an under-construction flat in Thane (Maharashtra):
---
### VAT on Under-Construction Flats in Maharashtra:
* **Before 1st April 2010:**
Builders were typically liable to pay VAT at the **standard rate of 5%** on construction (works contract tax).
* **After 1st April 2010:**
Maharashtra introduced a **composition scheme for works contract VAT** for residential units, where the effective VAT rate is about **1%** on the agreement value (excluding land cost).
This was to ease the tax burden and avoid cascading effect.
---
### Your case:
* You **registered the flat in August 2009** (before 1 April 2010), so **5% VAT rate applies** as per old rules.
* The builder should **not charge VAT on the land portion** of the flat (usually 30-40% of total cost), VAT is only on construction cost.
* If builder is charging 5%, it matches the older VAT rate and seems correct.
---
### Why 1% VAT might not apply to you yet?
* The 1% VAT composition scheme is effective only on flats registered **on or after 1 April 2010**. Since your agreement was before this date, builder cannot apply the lower rate.
---
### About the 4% input credit:
* Builders can avail input VAT credit on purchases and materials, which roughly brings down the effective tax burden, but this doesn’t affect the VAT charged to you as buyer directly.
* As a buyer, you pay VAT as per the builder’s invoice.
---
### Summary:
| Agreement Date | VAT Rate on Construction Portion | Land Cost VAT |
| ------------------------ | -------------------------------- | -------------- |
| Before 1 April 2010 | 5% | No VAT on land |
| On or After 1 April 2010 | \~1% (Composition Scheme) | No VAT on land |
---
If you want, I can help you draft a letter to your builder or advise on how to verify your VAT payment details. Would that be useful?
---
### VAT on Under-Construction Flats in Maharashtra:
* **Before 1st April 2010:**
Builders were typically liable to pay VAT at the **standard rate of 5%** on construction (works contract tax).
* **After 1st April 2010:**
Maharashtra introduced a **composition scheme for works contract VAT** for residential units, where the effective VAT rate is about **1%** on the agreement value (excluding land cost).
This was to ease the tax burden and avoid cascading effect.
---
### Your case:
* You **registered the flat in August 2009** (before 1 April 2010), so **5% VAT rate applies** as per old rules.
* The builder should **not charge VAT on the land portion** of the flat (usually 30-40% of total cost), VAT is only on construction cost.
* If builder is charging 5%, it matches the older VAT rate and seems correct.
---
### Why 1% VAT might not apply to you yet?
* The 1% VAT composition scheme is effective only on flats registered **on or after 1 April 2010**. Since your agreement was before this date, builder cannot apply the lower rate.
---
### About the 4% input credit:
* Builders can avail input VAT credit on purchases and materials, which roughly brings down the effective tax burden, but this doesn’t affect the VAT charged to you as buyer directly.
* As a buyer, you pay VAT as per the builder’s invoice.
---
### Summary:
| Agreement Date | VAT Rate on Construction Portion | Land Cost VAT |
| ------------------------ | -------------------------------- | -------------- |
| Before 1 April 2010 | 5% | No VAT on land |
| On or After 1 April 2010 | \~1% (Composition Scheme) | No VAT on land |
---
If you want, I can help you draft a letter to your builder or advise on how to verify your VAT payment details. Would that be useful?
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Regarding Appointment of auditor in case of casual vacancy
- RCM on GTA Services
- GST- DRC 03 RCM Liability
- REVENUE RECOGNITION AS PER IND AS 115
- Query on managerial remuneration u/s 197 of CA 2013
- Validity of form 15 G and 15 H on Interest on fixed deposit
- GST 9- Table 8
- Conversion of Proprietorship Firm to Partnership Firm
- Supply to unit situated in SEZ
- TDS AFTER SUBMISSION OF 15 G OR H
- EXCESS CREDIT REALTED GST REVERSAL
- Export invoice not reported
- CA Articleship Extension Matter
- GST OFFICER WRONG NOTICE
- "Please ensure that the Total of the Deductions u/s 54F match the same in Table D in Sch CG"
- Composition Dealer GST Annual Return Filing process
- Revision under Section 264 in The Income Tax Act, 1961
- TDS under section 195.
- Filing GST Returns after death of proprietor
- Registered Required in GST Act
Trending Online Classes
CAclubindia
