CA NeWs Beta*: ARTICLE ON MAHARASHRA VAT ON BUILDERS - PRESENT ISSUEs

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Friday, August 10, 2012

ARTICLE ON MAHARASHRA VAT ON BUILDERS - PRESENT ISSUEs

Recently, The Maharashtra Sales Tax department raided the offices of 13
city builders that have allegedly defaulted on payment of VAT. Among the
real estate developers whose offices were raided are Keystone Realtors,
Acme Group, Marathon Group, Evershine Builders, RNA builders, Sumer
Builders, Bhoomi Realty, Ekta Supreme Housing and Naman Developers, Dosti
Group and Ajmera Group. These builders are supposed to pay VAT on sale of
under-construction flats but have been defaulting on the payments, said a
senior sales tax official. Their pending dues are estimated to be Rs 25-30

crore, he added.VAT was imposed on sale of flats in 2006, but many builders
had moved Bombay High Court, challenging the constitutional validity of the
rule. The High Court in April dismissed their petition. Following the HC
directives, the Sales Tax department has begun collecting the pending dues
from builders, said an official. Commissioner of Sales Tax, Maharashtra,
Sanjay Bhatia said, "We will wait for other builders to come forward and
pay pending VAT. In case they do not, we will take action against them,
too." The builders, according to an officer, are supposed to clear their
dues. After mounting this pressure , The govt issued trader circular as a
final warning for Registration and payment of taxes with a red corner
warning to register before 16 th Aug 2012.
It may be noted that already a composition scheme @ 5% is in operation,
which is effective from 20th June, 2006i.e., the date on which the transfer
of property under construction was brought within the ambit of VAT.The
Maharashtra Government in the State budget of 2010 has also introduced a
composition scheme on sale of under construction property along with land
or interest in land @ 1% of the agreement value. The scheme is effective
from 1st April, 2010 but the Notification in respect of the same about the
manner in which the tax is to collected by the builder/developer has not
yet come. There is no setoff for inputs.

The case which is recently went in favour of Govt of Maharashtra in Bombay
High Court (being Tax writ petition No. 2022 of 2007) was based on levy of
tax on property under construction itself is challenged by the Maharashtra
Chamber of Housing Industry (MCHI), an association of builders.The main
issue involved in the writ petition is the competency of the State
Legislature to enact the definition of Works Contract in the manner which
suggests its applicability to the builders/developers, in addition to the
contractors. The definition talks about transfer of property in goods in
the execution of works contract including the building, construction, . . .
. . The Government is competent to levy tax on construction (sale of goods
involved in construction). Article 366 read with Article 246 (2) of the
Constitution has authorised it to do so. But power to levy tax on building;
i.e., sale of flats is unimaginable. It appears that prima facie the High
Court is convinced about this position and ordered interim relief for the
members of the Association. The High Court has directed that the members of
the MCHI should not be treated as 'dealers' liable to tax under the MVAT
Act, 2002 in respect of sale of flats on ownership basis under the
Maharashtra Ownership Flats Act, 1963 (MOFA Act), provided such members of
MCHI submit the data and documents as mentioned in the Court order.

The Government has introduced a composition scheme @ 1% on the agreement
value of the transfer of flat/unit under construction without providing any
deduction for land, etc wef 1-4-2010. There was an impression in the mind
of people that only under construction flats/units sold after 1st April,
2010 are chargeable to VAT @ 1%. This is not so, the amendment regarding
tax on flat/unit under construction is effective from 20th June, 2006. Due
to recent Trade Circular 14T, Tax is now also payable under earlier
composition scheme of 5%.

It is pertinent to note that the above cost can be avoided if a ready flat
is purchased after the builder obtains completion certificate.

FREQUENTLY ASKED QUESTIONS [FAQs] ON TAXATION OF DEVELOPERS


1. Admitting while not accepting that the State of Maharashtra can levy tax
on such a transaction, will our members get the credit of input tax paid
while effecting purchases of materials like cement, iron 86 steel etc.
required to be used in the Construction project. The members would pay the
tax under the MVAT Act as the applicable rate of 4% or 12.5% depending on
the material required to be used?

Ans: Yes, they will get input tax credit, if they paid the taxes u/r 58 or
u/s 42 (3).

2. In our life of industry, the practice is that an Agreement to Sell is
prepared much in advance at the time when a prospective buyer book the
accommodation in a building under construction and the developer concerned
undertake to give possession of the accommodation so booked after obtaining
completion certificate with the promised Position, we would like to know as
to at what point of time the VAT under the amended law would be payable?

Ans: Taxability arises on agreement. Tax is levied as and when the
installments become due and payable or are received, whichever is earlier.

3.Whether the levy of VAT on agreement for under construction flats/ shops
etc. is covered with in the amended definition of Works Contract? Is there
any scope for escaping this levy?

Ans: Yes. It is covered. No Scope for escapement.

4.What is the rate of tax under VAT Act applicable for agreement to sell
under construction flats?Ans: Tax rates would be those which apply to the
goods in which property is transferred.

5. What is the effective date from which the VAT will be applicable? -

Ans: The date of amendment i.e. 20 June, 2006.

6.The agreement to sell the flat was executed before 20.06.2006 and the
building was under construction and possession is given after 20.06.2006.
Whether the VAT will apply in Such case because the agreements were
executed prior to 20.06.2006? If yes how the sale value will be determined
for calculation of VAT? Whether the amount received prior to 20.06.2006
will be exempt from VAT? .

Ans: Yes. VAT will apply. It will be levied on value received or receivable
after 20th June, 2006.

7. Many times mere advances are received and agreement is executed much
later. What will be the point of liability whether at the time of receiving
the advances or at the time of execution of the agreement or thereafter on
possession?

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

8.The builders receive non-refundable deposits and other charges under the
agreement such as electricity deposit, water charges, legal charges,
development charges etc. Whether such receipts will also form part of sale
price for VAT?

Ans: The amounts which are received as deposits will be a deduction to the
extent such amounts are actually paid to other authorities.

9. In the under construction flats the amounts are received in
installments. How the sale price will be determined? Whether the actual
receipts will be taken as sales or the whole of the agreement value will be
taken as sale at the time of execution of the agreement, even though the
amount is yet to be received?

Ans: Received or receivable. Receivable means due and payable.

10.Can the VAT applicable in above cases be collected by raising a debit
note or the same should be mentioned in the agreement itself? Whether VAT
should be collected on each installment or at one go upon execution of the
agreement?

Ans: Yes. It can be collected by raising a debit note. Specific mention in
the agreement is a choice of the contracting parties. It should be
collected as and when the instalment becomes due.

11.What will be the amount of set off available in such cases i.e. full set
off of VAT paid on purchases or part of that?

Ans: Purchases made on or after 20th June, 2006, will be eligible for set
off subject to rules.

12. Whether any interest or penalty will be attracted for non registration
with sales tax authorities under VAT and no submission of VAT returns for
the transactions executed for sale of flats/ shops under construction
between intervening period i.e. 20.06.2006 to 07.02.2007?

Ans: Yes.

13.What will be VAT the implications where mere advances are received from
buyers and agreement for sale is not executed with the buyer?

Ans: There is no tax liability.

14. If composition scheme is not opted then what is the rate of tax and how
the sales price will be determined? What are the deductions permissible
like labour charges, profit margin etc. In such cases how the set off will
be worked out?

Ans: As per rule 58. Set off is related to purchases and not sales.

15. A Builder may construct more than one project, in such case, whether
different calculation method for different project can be applied?

Ans: Yes, he may adopt different method for each project, but he is not
allowed to change the method till the completion of that project.

16. What are the various options available to the developers for disclosing
tax liability?

Ans: Developers can discharge their tax liability by any of the following
option:-

From 20.06.2006 to 31.03.2010

1. Composition Scheme U/s 42 (3)- Under this scheme developer has to pay
5% tax on the agreement value. Land deduction is not available. Input tax
credit is available subject to the reduction of 4 per cent.
2. Actual Expense Method U/r 58- Under rule 58, the deduction of Labour
86 service charges is available on actual basis. Land deduction is also
available. Set-off will be calculated subject to the condition u/r 53 and
54.

3. Standard Deduction Method U/r 58- Under rule 58, the deduction of land
cost will be allowed. Thereafter 30% standard deduction from remaining
amount will be available as per proviso to sub-rule 1. Set-off will be
calculated subject to the condition u/r 53 and 54.

After 01.04.2010

The developers can opt for fourth option also, under this option u/s 42
(3A), developer has to pay 1% tax on agreement value. No land deduction and
input tax credit is available.

Needless to mention that, the developers will be required to make the
payment of interest according to the provisions of law.


After The Maharashtra Govt Budget 2010 *Notification No. VAT.
1510/CK-65lTaxation-1 dt. 9th July, 2010, the State Government has notified
such scheme.*

*Composition scheme for Builders and Developers*

The scheme is available to a *registered dealer* who undertakes the *
construction *of flats, dwellings or buildings or premises and transfer them
in *pursuance of an agreement* *along with land or interest underlying the
land* .

1. *Rate of MVAT payable* : 1% of
1. *aggregate amount* specified in the agreement or
2. value specified for the purpose of stamp duty in respect of
agreement under Bombay Stamp Act, 1958, …….. whichever is *higher*
2. *Conditions.*
1. All agreements which are *registered *on or after 1st April, 2010 can
be covered under composition. Registration of agreement is must.
Agreements
entered before 1st April, 2010 but registered on or after 1st April, 2010
will be eligible to be offered under composition scheme;
2. The claimant dealer (dealer claiming benefit of composition
scheme) should included the*agreement value* in turnover of sale in
the *period in which agreement is registered*;
3. The claimant dealer should make e-payment of MVAT payable against
such agreements for the purpose of filing return;
4. The claimant dealer will not be entitled to any set-off of taxes
paid in respect of purchases of goods used against opted works contract;
5. The claimant dealer must not used any goods or *property in
goods* purchased
from out of the state against C-Form for the purpose of contract
for which
composition of tax is opted. i.e. in relation to flat, dwelling, etc
against which he is paying tax under composition scheme, he must not used
goods purchase against C-Form.
6. The claimant dealer shall not issue declaration in Form 409 to
sub-contractor in respect of work contract for which composition is opted;
7. The claimant dealer shall not be entitled to change the method of
computation of tax liability in respect of contract for which he
has opted
fur this composition scheme;
8. The claimant dealer shall not issuc Tax Invoice.


The Maharashtra Government in the state budget of 2010 introduced a
composition scheme on sale of under construction property along with land
or interest in land @ 1% of the agreement value. There is no set off for
inputs.It may be noted that already a composition scheme @ 5% is in
operation which is effective from 20th June, 2006 i.e. the date on which
the transfer of property under construction was brought within the ambit of
VAT.

There is an impression in the mind of people that this amendment and only
under construction flats/units sold after 1st April, 2010 are chargeable to
VAT @ 1%. This is not so, the amendment regarding tax on flat/unit under
construction is effective from 20th June, 2006. In this budget the
Government has come out with new composition scheme of 1% of agreement
value without any deduction for land against earlier composition scheme of
5%.

Subsequently provision for MVAT Act were amended and section 40(3A) was
inserted by Mah Act No XII of 2010 dated 29-4-2010 w.e.f. 1-4-2010. Section
40(3A) empowers the State Government to notify by publishing in Official
Gazette, i) a scheme of composition for the registered dealers who
undertake the construction of flats, dwelling or buildings or premises and
transfer them in pursuance of an agreement along with the land or interest
underlying the land and ii) prescribe the rate of tax by way of
composition, in lieu of the amount of tax payable on the transfer of goods
(whether as goods or in some other form), in execution of such works
contracts by such registered dealer under this Act.


*Bombay HC dismisses petition challenging applicability of VAT on sale of
flats*
The Bombay High Court appears to have served a body blow to realtors in
Maharashtra.The HC dismissed their petition that challenged the
applicability of Value Added Tax(VAT) on sale of flats. The builders argued
that VAT is not payable on immovable property.The court, however, upheld
the 2006 amendments to Maharashtra Ownership Flat Act that brought
"construction" on the tax radar.The builders will now have to cough up
outstanding VAT dues since 2006. The builders will now challenge the order
in the Supreme Court.



*TRADE CIRCULAR*

*No. *Build-Devep/Adm.Relief.06-10./Adm-8

Trade Cir. 14T of 2012 Dated – 06.08.2012

*SUB: Grant of Registration and Administrative Relief to Developers.*

*BACKGROUND:*

1. The Hon. Bombay High court has delivered judgement in case of
Maharashtra Chamber of Housing Industry (MCHI) vs. State of Maharashtra in
respect of the writ petition no. 2022 of 2007. The constitutional validity
of the amendment to section 2(24) of the Maharashtra value added tax Act,
2002,Notification dated 9­7-2010 notifying a composition scheme for
Builders, Developers was upheld. The Promoters and Builders Association has
filed special leave petition No. 17738 and 17709 of 2012 before the Hon'
Supreme Court of India. Hon' Apex Court admitted the petition but no stay
is granted to the judgement of Hon Bombay High Court.As a result, the
developers are liable to pay tax under Maharashtra Value Added Tax Act,
2002 with effect from 20th June, 2006.

2. Considering the above position, it is expected that large number of
developers will come forward to obtain theregistration under
Maharashtra Value Added Tax Act, 2002. In order to facilitate
obtaining registration, grant of administrative relief for unregistered
period, and filing of return for period starting from 20/06/2006 for these
dealers, following measures are being taken by the Sales Tax Department.

a) At every division, a dedicated officer of registration branch will be
assigned with the job of granting registration to developers. Display board of
such facility will be placed at the conspicuous location in office premises.

b) No pre-registration visit will be conducted to the place of business of
developers.

c) At present, after uploading of registration application, the system
generated appointment date is communicated to the dealer. However in case
of developers, a dedicated registration officer will attend to such dealers
on next day of uploading the registration application, irrespective of the
appointment date given by system.

d) Registration number should be granted to such dealers on the same date
on priority, subject to the developers submitting the necessary documents.

e) As per the earlier Circular instructions, if there is a delay in
obtaining certificate of registration beyond a period 5 years, then this
delay is treated as an attempt to evade the tax and such dealers are not
considered for grant of administrative relief. However for developers, the
delay beyond a period of 5 years in obtaining registration will not be
treated as an attempt to evade tax and these dealers will be granted
administrative relief if they apply forregistration before 16/08/2012.

f) If the developer applies for registration on or before 16/08/2012 and
applies for administrative relief on or before 31/08/2012 alongwith proof
of filing of returns and payment of tax for unregistered period, then the
compounding fee for all unregistered period shall be levied at Rs. 5000
only.

However, if any developer fails to apply for registration and
administrative relief before above-mentioned date then the compounding fee
will be levied as per office order No. IMC10.07/Adm Relief/URD/Adm­4/B-1020
Mumbai Dated 18 April, 2007, which will be as below:-

"For dealers who have not obtained Registration Certificate immediately
after they became liable forregistration but obtain
a Registration Certificate under the MVAT Act after remaining unregistered
for some time.

The compounding fee should not desirably less than, Rs. 5000 plus 0.5% of
the gross sales tax liability, arising during unregistered period, for each
month of delay in obtaining the Registration under the relevant Act."

g) Once the developer submits his application for administrative relief
along with compounding fee and pays taxes with returns for unregistered
period, the concerned Joint Commissioner shall pass the order granting
administrative relief within two days. There will be no need to give
hearing to the dealer.

h) Considering the expected workload, more Joint Commissioners are
entrusted with the powers of grant of administrative relief in Mumbai and
Pune.

i) The registration officer while granting the registration to these
dealers should set the periodicity of their returns as quarterly.

j) Being a works contractor, the dealers should file their returns in form
no. 233.

k) Needless to mention that the developers should upload all their returns
along with tax, interest and late fee.

*1) The developers who have still not obtained registration shall
obtain registration on or before 16th August, 2012. In such cases penalty
under sub-section (2A) of section 29 of MVAT Act will not be attracted.*

m) Those developers who had obtained registration and paid taxes for period
after 01-04-2010 should apply for administrative relief for previous period
and file returns for previous periods on or before 31st August, 2012.

n) The department will initiate penal actions against developers who will
not obtained registration and file the returns within above time.

o) If the Audit Report u/s 61 in Form No. 704 for all the periods up to
2011­12 are filed on or before 30th November, 2012, then the penalty u/s 61
(2) will not be levied.

3. To facilitate these dealers and to resolve their queries, dedicated help
desks have been opened at following offices of the Sales Tax Department,
viz, Mumbai,Thane, Pune, Kolhapur, Nasik, Nagpur and Aurangabad. The name
of the help desk officers and their telephone numbers are given below.
LOCATION


NAMECONTACT

NUMBERS


e-MAIL Mumbai Shri S. K. Nikam23760565 nikam.sk@mahavat.gov.in


Mumbai Shri D. S. Shinde23760562 shinde.ds@mahavat.gov. in ThaneShri Y. A.
Lokare 25496231
9892824521lokare.ya@mahavat.gov.in


Pune


Shri R. G. BANKHELE26609218

9822006188
bankhele.rg@gmail.com Kolhapur


Shrimati S. V. Miskin


2663932 / 42miskin.sv@mahavat.gov.in


Nasik Shrimati S. D. Thorat2335173
9421689354thorat.sd@mahavat.gov.in


Nagpur


Shri S. V. Lahane9823999375


lahane.sv@mahavat.gov.in


Aurangabad


Shri R. V. Darke 9850298652darake.rv@gmail.com



4. A Frequently Asked Questions [FAQs] regarding the tax liability and
other issues raised by MCHI is annexed with this trade circular.

5. In case of difficulties, the dealers are requested to approach the
concerned Joint Commissioner of Sales Tax.

6. This circular cannot be made use of for legal interpretation of
provisions of law, as it is clarificatory in nature. If any member of the
trade has any doubt, he may refer the matter to this office for further
clarification.

You are requested to bring the contents of this circular to the notice of
all the members of your association.

*(Sanjay Bhatia)
Commissioner of Sales Tax*

*Maharashtra State, Mumbai.*

*FREQUENTLY ASKED QUESTIONS [FAQs] ON TAXATION OF DEVELOPERS*

*1.* Admitting while not accepting that the State of Maharashtra can levy
tax on such a transaction, will our members get the credit of input tax
paid while effecting purchases of materials like cement, iron 86 steel etc.
required to be used in the Construction project. The members would pay the
tax under the MVAT Act as the applicable rate of 4% or 12.5% depending on
the material required to be used?

*Ans: *Yes, they will get input tax credit, if they paid the taxes u/r 58
or u/s 42 (3).

*2. *In our life of industry, the practice is that an Agreement to Sell is
prepared much in advance at the time when a prospective buyer book the
accommodation in a building under construction and the developer concerned
undertake to give possession of the accommodation so booked after obtaining
completion certificate with the promised Position, we would like to know as
to at what point of time the VAT under the amended law would be payable?

*Ans: *Taxability arises on agreement. Tax is levied as and when the
installments become due and payable or are received, whichever is earlier.

*3.*Whether the levy of VAT on agreement for under construction flats/
shops etc. is covered with in the amended definition of Works Contract? Is
there any scope for escaping this levy?

*Ans: Yes. *It is covered. No Scope for escapement.

*4.*What is the rate of tax under VAT Act applicable for agreement to sell
under construction flats?*Ans: *Tax rates would be those which apply to the
goods in which property is transferred.

*5.* What is the effective date from which the VAT will be applicable? -

*Ans: *The date of amendment i.e. 20 June, 2006.

*6.*The agreement to sell the flat was executed before 20.06.2006 and the
building was under construction and possession is given after 20.06.2006.
Whether the VAT will apply in Such case because the agreements were
executed prior to 20.06.2006? If yes how the sale value will be determined
for calculation of VAT? Whether the amount received prior to 20.06.2006
will be exempt from VAT? .

*Ans: *Yes. VAT will apply. It will be levied on value received or
receivable after 20th June, 2006.

*7*. Many times mere advances are received and agreement is executed much
later. What will be the point of liability whether at the time of receiving
the advances or at the time of execution of the agreement or thereafter on
possession?

*Ans: *Tax will be levied from the date of the agreement. The amount of
advance, as and when it is adjusted towards the agreement amount, will be
taxed.

*8.*The builders receive non-refundable deposits and other charges under
the agreement such as electricity deposit, water charges, legal charges,
development charges etc. Whether such receipts will also form part of sale
price for VAT?

*Ans: *The amounts which are received as deposits will be a deduction to
the extent such amounts are actually paid to other authorities.

*9. *In the under construction flats the amounts are received in
installments. How the sale price will be determined? Whether the actual
receipts will be taken as sales or the whole of the agreement value will be
taken as sale at the time of execution of the agreement, even though the
amount is yet to be received?

*Ans: *Received or receivable. Receivable means due and payable.

*10.*Can the VAT applicable in above cases be collected by raising a debit
note or the same should be mentioned in the agreement itself? Whether VAT
should be collected on each installment or at one go upon execution of the
agreement?

*Ans: *Yes. It can be collected by raising a debit note. Specific mention
in the agreement is a choice of the contracting parties. It should be
collected as and when the instalment becomes due.

*11.*What will be the amount of set off available in such cases i.e. full
set off of VAT paid on purchases or part of that?

*Ans: *Purchases made on or after 20th June, 2006, will be eligible for set
off subject to rules.

*12.* Whether any interest or penalty will be attracted for non
registration with sales tax authorities under VAT and no submission of VAT
returns for the transactions executed for sale of flats/ shops under
construction between intervening period i.e. 20.06.2006 to 07.02.2007?

*Ans: *Yes.

*13.*What will be VAT the implications where mere advances are received
from buyers and agreement for sale is not executed with the buyer?

*Ans: *There is no tax liability.

*14. *If composition scheme is not opted then what is the rate of tax and
how the sales price will be determined? What are the deductions permissible
like labour charges, profit margin etc. In such cases how the set off will
be worked out?

*Ans: *As per rule 58. Set off is related to purchases and not sales.

*15.* A Builder may construct more than one project, in such case, whether
different calculation method for different project can be applied?

*Ans: *Yes, he may adopt different method for each project, but he is not
allowed to change the method till the completion of that project.

*16.* What are the various options available to the developers for
disclosing tax liability?

*Ans: *Developers can discharge their tax liability by any of the following
option:-

*From 20.06.2006 to 31.03.2010*

*1. Composition Scheme U/s 42 (3)- *Under this scheme developer has to
pay 5% tax on the agreement value. Land deduction is not available. Input
tax credit is available subject to the reduction of 4 per cent.
*2. Actual Expense Method U/r 58- *Under rule 58, the deduction of Labour
86 service charges is available on actual basis. Land deduction is also
available. Set-off will be calculated subject to the condition u/r 53 and
54.

*3. Standard Deduction Method U/r 58- *Under rule 58, the deduction of land
cost will be allowed. Thereafter 30% standard deduction from remaining
amount will be available as per proviso to sub-rule 1. Set-off will be
calculated subject to the condition u/r 53 and 54.

*After 01.04.2010*

The developers can opt for fourth option also, under this option u/s 42
(3A), developer has to pay 1% tax on agreement value. No land deduction and
input tax credit is available.

Needless to mention that, the developers will be required to make the
payment of interest according to the provisions of law.
Critical issues which may arise

1. Even though 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.

2. 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.

3.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

4.under works contract there should be proportion for service and materials
used. and on materials used% vat should be payable.

5. Tax to be paid on Sale Value or Stamp Duty whichever is higher. It may
create scope for investigation of Cost during Assessment of Cases.

6.No set off and No C Forms and No 409(sub contractor to pay tax)

7. Agreement for sale executed under the act was a conveyance, as it
conveys right, title and interest in the flat to the purchaser. Therefore
it was not possible to accept that the contract involving sale of a flat
under MOFA was not a works contract. This was the main issue challanged in
court of Law.

8.The indivisible works contracts were not covered under the State Sales
tax Acts since works contracts were not normal sales. The Supreme Court
confirmed this legal status in its land mark judgment in the case of Gammon
& Dunkerely (9 STC 353). Due to this legal status, the states were denied
the levy of Sales Tax on the indivisible works contracts. Such contractors
were outside the purview of sales tax laws.

9. Judgement of Uttar Pradesh (Referring K. RAHEJA REFERRED TO LARGER
BENCH cannot be accepted as a universally ):-We may also point out that, if
contention of the petitioners is to be accepted, it will lead to various
complications, anomalies and it will give a handle for avoiding payment of
Stamp Duty on sale transactions by making payment before hand and
executing the property subsequently. Parties get no edge to argue that
since they had already paid certain amounts, it will invariably mean
vesting transfer of right or ownership in a given property, cannot
be accepted as a universally correct proposition in law. It will result
preposterous." This decision became final and is a binding precedent. It is
worthwhile to reproduce an important. Government order no.
ka.Ni.-5-4122/11-2000-500(9)/99 dated 27 July 2000 issued the Principal
Secretary Tax & Registration, Uttar Pradesh.

10. Real estate builders want tax exemption for retrospective amendment
and may accept tax levy from current year. Builders blame Maharashtra for
stalling affordable housing. The Builders have to pay vat @ 5% on the flat
sold from June 2006 and also what are the deductions possible for the same.
Is it possible to calculate before 16 th Aug 2012 and pay tax before
31-8-2012. The builder has to pay this tax from his pocket as under.

11. Works Contract — TDS : S. 31 of the MVAT Act provides that the
Commissioner may, by notification, require any dealer or person or class of
dealers or persons (hereafter referred as 'the employer') to deduct tax on
such amount payable on the purchases effected by them, as may be notified.
All such employers shall have to :
(a) Take a Tax Deduction Number (Works Contract) from the Sales Tax
Department. Application to be made, in Form 401, within three months from
the day he becomes liable to deduct TDS.

(b) Deduct tax, at prescribed rate, from the amount paid or payable to a
contractor during a given period.

(c) Deposit the amount so deducted with the Govt. treasury within 10 days
from the end of month in which such tax is deducted or is required to be
deducted.

(d) Issue a certificate of deduction of tax, immediately, in Form 402.

(e) Submit monthly (quarterly) statement of tax deducted at source, in
respect of each of such contractors, to the respective prescribed officer,
in Form 403, within 20 days from the end of the month.

(f) Maintain necessary records in prescribed format, Form 404.

(g) File an annual return of TDS, in Form 405, within 3 months from the end
of the year.

(h) Attend and produce records before the assessing authority as and when
asked to do so.

Notes :

1. A contractor, awarding sub-contracts, is not required to deduct TDS from
such sub-contractor.

2. TDS provisions are not applicable in respect of works contract liable to
tax under the CST Act.

3. TDS not required to be deducted where the amount or the aggregate of the
amount payable to a dealer by such employer is less than Rs.5 lakh during
any year.

Employers notified for the purposes of TDS :

1. The Central Government and any State Government,

2. All Industrial, Commercial or Trading undertakings, Company or
Corporation of the Central Government or of any State Government, whether
set up under any special law or not, and a Port Trust set up under the
Major Ports Act, 1963,

3. A Company registered under the Companies Act, 1956,

4. A local authority, including a Municipal Corporation, Municipal Council,
Zilla Parishad, and Cantonment Board,

5. A Co-operative Society including a Co-operative Housing Society
registered under the Maharashtra Co-operative Societies Act, 1960,

6. A Registered Dealer under the Maharashtra Value Added Tax Act, 2002.

7. An Insurance or Finance Corporation or Company; and any Bank included in
the Second Schedule to the Reserve Bank of India Act, 1934, and any
Scheduled Bank recognised by the Reserve Bank of India.

8. Trusts, whether public or private.

Rate of TDS :

The notified employers are required to deduct TDS, from the amount payable
to a contractor @ 2%, if the contractor is a Registered Dealer, otherwise @
4%.

References

http://www.indianexpress.com/news/sales-tax-dept-raids-13-builders-offices/982223/
www.stpam.orgwww.taxguru.in
http://www.accommodationtimes.com/real-estate-news/recent-development-in-service-tax-and-vat-in-real-estate/
http://cakamalg.blogspot.in/2010/07/mvat-composition-scheme-for-builders.html
--
CA GIRISH KULKARNI
JOSHI KULKARNI & CO.
LOCATION :- AURANGABAD , MUMBAI, PUNE , NANDED
CONTACT 92253 06814 EMAIL girishkulk@joshikulkarni.co.in

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