Vat for under constr flat bangalore

Mr Rajendra,

  What you have mentioned in the query is correct and it is binding on all concerned,with respect to tax collection,assessment etc. Here the options open are :1)contacting the CT department through e-grahak section of their web site 2) going to consumers court 3)or filing a civil suit. For all these actions the stake should be considerably high.Here the builder will have a problem of accounting showing calculation about the vat liability.Reduction from vat has to be given to each buyer at different percentage and it should be proved to the vat authorities.Some disputes may arise, regarding the reduction given to the flat buyers,with the authoriries.On this matter the commissioner should issue instructions to department officers and tax payers,which is not done so far.Here evaluation of work already completed when a buyer enters into agreement is a difficult process. However, some concession, keeping the govt on the gaining side,can be given.In your case 10% benifit can be safely given. Suppose a building construction is nearing completion,75% reduction can be offered. This SC order has also become a loophole for  builders to claim some tax reduction in the returns and not pass on the same to their customers.From the records of a builder it is very difficult to establish the actual progress done in the construction work,because it will be showing only items like,purchases,receipts,expenses on various activities.etc.So,a builder can pose many practical difficulties........mjk  

Thanks Mr. Krishnamurthy, for your advice in this regard. Let me talk to builder about this.

Also, your "giving back to society" thoughts are truly inspirational. Keep up the good work.

 

Regards,

Rajendra

Sir,

    Kindly go through the attached file and suggest me with regard to VAT and service tax. 75% of the construction has been completed. He is calculating VAT for (Basic value + Car parking value + electrical,water.sewage & amenites values) x 8.6%. Kindly inform the percentage of VAT and ST. Whether  car parking + electrical, water,sewage & amenities has to be included for VAT & ST calculation? Please reply.

With regards

Kalpana

Hi,

I am from Mana Builders Pvt.Ltd, based in Bangalore. 
1) My ques is what is exact percentage of VAT for under construction project. In Bangalore different builders charging different VAT percentages, like 5.5%, 4%, 7%, 9.5% &14.5% on 70% of total cost. 
in both scenarios  (A) for Joint Development  (B) builder owned property.
2) VAT calculated on only Total basic cost or on Grand total cost including clubhouse charges, car parking, Bescom & BWSSB charges, maintenance, & corpus fund.
3) Service Tax  calculated on only Total basic cost or on Grand total cost including clubhouse charges, car parking, Bescom & BWSSB charges, maintenance, & corpus fund.

Please give clarification on above mentioned points with any Govt approved sections numbers or any weblinks which are from Govt authorities. Because every builder showing their own calculation which looks correct. so particularly we need your answers with Govt approved letters or links or copies. That would help buyers for making right decision. 

Thanks,
Chethan

Mr Chetan Kumar, Please note the following points as answer to your queries : 1) The amount charged by a builder includes several expenses such as ,a) land cost,b) material consumed for construction,c) labour and service expenses,d) collection of deposits,taxes,e) charge for common amenities etc. 2) VAT is payable on cost of material + profit,involved in the construction of an apartment.To arrive at this value one has to deduct items of a),c),d) from the total amount charged to flat buyers. On such material value 14.5% VAT is payable.Some times dealers claim 30% as labour service charges,then 70% of the amount arrived after reducing the above items(a,c,d,)is to be taken as material cost+ profit. 3) ST is payable on actual expenses made on labour and services.To avoid accounting controversies many dealers opt for 40% of total construction cost(total -a) and d)) @ 12.36%(now revised to 14%). 4) Here several problems arise while explaining to each flat buyer the actual liability of taxes.Hence they are quoting a general overall rate as 7.5%,8.8%,9% etc. inclusive both VAT and ST,depending on the deductions to be done out of the total amount. These are not correct rates,but they may be collecting correct amounts.So,each case has to be verified taking all figures into account.....mjk

Mrs Kalpana,

 I am sorry I did,nt notice your query in web site. I read your query. Here the information is incomplete,because the land cost is not given. Land cost is not taxable for both VAT and ST.If you have all these deatails pl send message again.Even you can send e-mail to mjkrishnamurthy @ gmail.com...mjk