02 August 2025
Regarding **VAT on sale of flats by an individual under a proprietorship concern (project of 10 flats)**:
### Key points:
1. **Is VAT applicable on sale of flats by an individual (proprietor)?**
* If the individual is selling flats **as a part of business or commercial activity** (like developing or trading flats), it is considered a **works contract** or **sale of goods**. * VAT is generally applicable on the sale of under-construction flats (works contract nature). * If the flats are **ready possession** (already constructed before sale), VAT is usually **not applicable** on sale of the flat itself (though service tax or other taxes may apply).
2. **Sale of flats under a project of 10 flats:**
* A project of 10 flats can be treated as a **commercial activity**. * If the individual is selling flats regularly (more than one), it is likely to be considered a business. * Hence, VAT registration and VAT payment would be applicable if turnover crosses threshold.
3. **VAT rate and liability:**
* VAT is usually charged at **1% to 5%** (depends on the state and applicable scheme) on the value of the flat excluding land cost. * Land is generally exempt from VAT; VAT applies on construction cost only. * The individual may have to register for VAT as a dealer if turnover exceeds limit (varies by state).
4. **If selling as a one-off sale or personal sale:**
* Occasional sale without intention to carry on business may not attract VAT. * However, selling 10 flats likely indicates business activity.
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### Summary:
* If the individual selling 10 flats under a proprietorship is doing so as a business, VAT **will apply** on under-construction flats. * VAT registration is required if turnover exceeds threshold. * VAT is generally payable on construction cost portion, not on land. * For ready possession flats, VAT is usually not applicable.
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If you specify the state, I can give more precise details on rates and registration limits. Would you like that?
CAclubindia
