The real estate company - vat applicability

Respected Experts and friends,

M/s. ABC Company is Real Estate Company located in Maharashtra/Karnataka (Any place). It has owned Land for construction of Apartments. It has received Advance money from various customers towards purchase of Apartments.

The Company 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 .

The Company says it will pay VAT, if any at the time of handing over the possession to the customers.

Is this approach correct to avoid VAT liability under the respective States VAT Act?

If yes, then again what is the logic/legal provision behind paying VAT at the time of handing over the possession?

 

The Company either construct the Apartment itself or give it to the sub-contractors.

 

Please kindly suggest.

Replies (6)

"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.

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
Featured ARTICLESHIP 06 October 2026
Semi Qualified

AJAY SINGH AND CO LLP

Thane

CA Final

View Details
Company
30 September 2026
Senior Accountant

Codeboard Technology

Chennai

B.Com

View Details
Company
24 October 2026
CA Industrial Trainee

Fytomax Nutrition Private Limited

Aurangabad

CA Inter

View Details
Company
06 October 2026
Assistant Manager - Audit and Compliance

Ravi K Jain & Co

Noida

Others

View Details
Company
26 September 2026
Chartered Accountant

pushpganga ventures

Pune

CA

View Details
Company
Featured 03 October 2026
Accountant

A P Lodha and Associates

Jalna

B.Com

View Details
Company
16 October 2026
CA article trainee

Zerdi & Co. Chartered Accountants

Pune

CA Inter

View Details
Company
ARTICLESHIP 07 October 2026
Article Trainee/ CMA Trainee

RMA And Associates LLP

New Delhi

CA Inter

View Details