The real estate company - vat applicability

"The Company has executed Agreement to sell (AOS) with the Customers for sale of Apartments."

Without any advance money?

If advance received, service tax liability arises.

Originally posted by : Dhirajlal Rambhia
	"The Company has executed Agreement to sell (AOS) with the Customers for sale of Apartments." Without any advance money? If advance received, service tax liability arises.

Yes Sir. I agree.

The Company has received advance money and the Company is liable to Service Tax.

But I want to know the VAT applicability.

Please advise.

Even though VAT is state subject, But generally rules are same :

1. That VAT is levied on works contract/ under construction properties and not on COMPLETED Units.

2. Tax is levied as and when the installments become due and payable or are received, whichever is earlier.

3. Tax levied from the date of the agreement. The amount of advance, as and when it is adjusted towards the agreement amount, is taxed.

For your understaning FAQ :MVAT on Developers is attached herewith

Thank you sir.

I agree with your response. Even I am of the same view. The provision is much similar to Karnataka VAT.

But in many case laws including one of my client, the Builder has received advance and has executed Agreement to sell (AOS) with the Customers for sale of Apartments. But it has not entered into any Development agreement/Construction Agreement with the Customers. Because of this reason; the Company is not paying VAT and also not collecting VAT from customers as there is nothing to show that Work Contracts has been awarded by the Customers to the Company.

If it is the case, when will VAT liability arise ? 

 

Actually, by bifurcating the construction agreement a loophole in the rules has been created. Though challanging, but have a stand.

Originally posted by : Dhirajlal Rambhia
	Actually, by bifurcating the construction agreement a loophole in the rules has been created. Though challanging, but have a stand.

I agree sir.

Thanks for your valuable replies.