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Applicability of mvat to builders

saurabh (Propriotor) (25 Points)

29 May 2012

Dear sir/mam,

I am a practicing chartered account. just started my practice. I want to clear some of my ideas regarding applicability of MVAT on Builders/ building construction work..

One of my clients has started construction business. He entered into an agreement to sale with 3 person. Among them two has given advance against that agreement to sale. I referred Mvat act, but dint find any solution. I just wanted to know that when MVAT Liability will incur? In addition to this also wanted to know what will be the impact of VAT on below mention situation.. A)Is Registration of agreement compulsory?? , B) Possession with/without any such agreement & C) Advance received against such transaction with/without entering into such agreement.

please do needful.

thanx..

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5 Replies

Harshal Fifadra (Chartered Accountant) (1489 Points)
Replied 30 May 2012

Dear Saurabh

The applicability of MVAT to the Builders is under a sky of complications and Controversies

It is not yet approved by the State government to levy VAT on sale of flat by the builder

Wait for the Notifications and Circulars

1 Like

saurabh (Propriotor) (25 Points)
Replied 31 May 2012

Thnx Harshalji,

Could you please suggest me that what would be my plan of action till this ambiguity get resolved??

Harshal Fifadra (Chartered Accountant) (1489 Points)
Replied 31 May 2012

Plan of action would be to do your Home Work i.e work out the liability of builders as if he is a works contractor

MJ Krishnamurthy (ACCT(Retd)) (7197 Points)
Replied 12 June 2012

Mr Saurab/Harshal,

In the absence of any specific rate being fixed for sale of flats/apartments it is to be treated as normal civil works contract only.The honourable Supreme Court and many Hcs have decided many cases on this subject. As per these rulings ,when a builder receives advances for sale of apartments,with or without an agreement,it becomes a taxable works contract.MVAT liability arises on the material value involved(after taking exemption on labour,expences,and land cost the balance amount),split inot respective material(with GP)value and taxed at appropriate rates.If any apartment is sold after completion of construction it is exempt from VAT....MJK