After completion of project, Builder cannot charge VAT


After obtaining a completion certificate (CC) for the project from the municipal corporation, a builder cannot charge VAT from the purchaser of flat.

A builder cannot charge Value Added Tax (VAT) on transaction for sale of flat effected after he has secured completion certificate for the project from the municipal corporation, the Pune district consumer disputes redressal forum has ruled.

In an order passed on Thursday, a three-member bench of the forum, headed by its president V P Utpat, held city-based construction firm, Kshitij Promoters and Developers in Erandwane, liable for deficiency in service and unfair trade practice for wrongfully collecting 1% VAT from the purchasers of a flat and not returning the same.

The bench, which also comprised members Mohan Patankar and Kshitija Kulkarni, directed the firm and its partners, S P Paranjape and Vinayak D Gokhale, to refund the Rs 70,230 VAT that was collected from complainants Janice D’sa and Leena D’sa within six weeks from the date of order. The firm has also been ordered to pay Rs 20,000 compensation to the complainants towards physical and mental agony.

The construction firm had secured development rights for a land at Pashan and got a building plan approved by the Pune Municipal Corporation (PMC) on March 28, 2007. Post-construction of the project `Crystal Gardens’, the firm had secured a completion certificate from the PMC on September 27, 2010.

In October/November 2010, the complainants purchased a 1,353 sq ft ninth-floor flat, along with 21 sq ft terrace and 107 sq ft parking lot, in the project for Rs 70,23,000. They paid all the money, as agreed, between November 8 and 18, 2010 including stamp duty and registration fees and also issued a cheque for 1% VAT (Rs 70,230) to the firm on November 9, 2010.

Lawyer Nitin Munot, who represented the complainants, told TOI, “The Bombay high court was then seized of a writ petition regarding VAT-related disputes on transactions between 2005 and 2010. Provisions regarding application of VAT were different prior to March 31, 2010 as the tax was calculated on the basis of project. However, after March 31, 2010, a blanket 1% VAT was made applicable on all transactions. In view of the legal dispute, there was no clarity as VAT was being collected by some builders and some others did not. The high court passed a judgment in 2012 following which the state authorities started raising demand for VAT from builders and the latter started issuing letters to their customers.”

In August/September 2012, the firm wrote to the complainants claiming that VAT was applicable to them as per the high court order. The complainants then consulted a tax expert who told them that VAT cannot be charged for projects which have already received completion certificate. The complainants then sent an e-mail to the firm demanding refund of the Rs 70,230 VAT collected from them. In August 2013, they moved a consumer complaint before the forum claiming that the builder wrongfully charged them VAT. The firm contested the complaint on various grounds including the argument that it had forwarded the VAT money to the government.

In support of their case, the complainants had submitted a chartered accountants report certifying that the transaction for sale of flat was done after issuance of completion certificate and VAT was not applicable to the same. “We also submitted a February 21, 2012 circular by the sales tax commissioner which had asked builders to file their revised returns for the period between June 20, 2006 and December 31, 2014 and argued that the firm had an opportunity to get refund of the Rs 70,230 VAT from the government by filing the revised return but, it did not do so,” said Munot.


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