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Why VAT on builders??

Akshay (Taxation) (514 Points)

17 February 2012

State can not levy VAT on builders as builders sell immovable property on which state levy stamp duty.

Now whether there will be any change?? in the light of recent Bombay High Court Judgement dt.January 19/20 of 2012 on WRIT PETITIONS in the case Maharashtra Chamber Of Housing Industry V/S union of india where in levy of service tax on

builders was confirmed as constitutional.

Why is applicabilty VAT for Builders?? by way of composition scheme or in deeming provison of 1% Tax

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6 Replies

vivekanandhan (DCTO) (39 Points)
Replied 17 February 2012

If they use their materials(cement,steel,electrical etc) they had to pay VAT on their deemed sale value by adding freight and Gross profit.

Akshay (Taxation) (514 Points)
Replied 17 February 2012

but main thing is that, Selling flat is immovable property. Maharashtra VAT Act, Clearly states that VAT is applicable on the Movable Goods. hence basically Flat is Immovable property then Why to adopt Deeming provision of the Act or composition scheme.

vivekanandhan (DCTO) (39 Points)
Replied 17 February 2012

Eventhoug its immovable property it was constructed by movable things only.Hence every contractor,builder or construction companies have to pay VAT on the materials(movables) involved in the construction.If it was only a labour contract(materials given by the awardee) there is no liability of VAT.

vivekanandhan (DCTO) (39 Points)
Replied 17 February 2012

They had to pay VAT on the materials at approriate rates or under composition tax on the total value of the contract .For the labour charges they had to pay service tax.