Calculation of MVAT 2012 for Purchase of Under construction flat

Hi Jayesh! Let's break down your query about MVAT 2012 on purchase of an under-construction flat, focusing on the VAT demand, standard deduction, and input tax credit (ITC) setoff under rules 52 and 55.

1. Calculation of Taxable Sales Value under Standard Deduction

Under Maharashtra VAT Act 2002 (MVAT 2012), for sale of under-construction flats, the tax is usually levied on the sale consideration minus land value. Further, a standard deduction of 30% is allowed on the balance amount to cover expenses related to construction, etc.

So,

• Contract Value (Agreement Value) = say, CV

• Land Value = LV

• Taxable Value = (CV - LV) × 70% (since 30% is deducted)

2. VAT Demand @ 5% on Agreement Value

Builder demands VAT at 5% on entire agreement value CV.

You want to argue that tax should be on the standard deducted value (CV - LV) × 70% instead.

3. Input Tax Credit / Setoff u/r 52 and 55

• Rule 52 provides for setoff of VAT paid on purchase of goods for resale or use in manufacture.

• Rule 55 relates to setoff of tax paid on inputs and capital goods.

However, in case builder has not maintained books of accounts, claiming exact input tax credit (ITC) becomes difficult. The amount of ITC/setoff the builder can claim would depend on actual VAT paid on inputs, and it must be backed by invoices, tax payment proofs, etc.

4. What can be done practically?

• Since the builder has no proper books, ITC claim would be limited or disallowed as per MVAT rules.

• The buyer (you) can request the builder to disclose the taxable value after standard deduction and demand VAT accordingly.

• If the builder insists on charging VAT on entire agreement value, you can challenge it before the VAT appellate authority citing the standard deduction provisions.

5. Summary and Steps