Don't pay VAT: Consumer groups

PUNE: The vexed issue of payment of Value Added Tax (VAT) on apartments sold in the state from 2006 to 2010 remains unsolved in the absence of transparency on part of most builders in levying the charge on consumers.
As per the Supreme Court order, the Maharashtra sales tax department will not levy interest and penalty on developers, if they register the sale of such flats by October 15 and pay the VAT by October 31.Accordingly, the builders have started sending notices to flat owners.
About 1,500 flat owners who gathered at Bhave school near Perugate on Sunday morning were scared, angry and confused as they sought clarification on how much exactly do they owe the builders.
The awareness programme was jointly organised by the Sajag Nagarik Manch, the Akhil Bharatiya Grahak Panchayat and the Grahak Hitwardhini to unite flat owners and address their concerns. Sudhakar Velankar, Vivek Velankar, Suryakant Pathak, Govind Patwardhan and Sager Vijay guided the participants.
Suryakant Pathak of the Akhil Bhartiya Grahak Panchayat appealed to owners, who bought flats between June 20, 2006, and March 31, 2010, not to pay the VAT. "There have been instances where the builders demanded a flat 5% tax on the agreement cost. There are also cases where they asked for 1% tax. In any case, the builders need to produce a tax invoice so that people know what exactly is the taxable component," said Pathak.
Sager Vijay, who is an advisor with the Grahak Panchayat, clarified the concept of taxable components. "If a building cost is shown as Rs 50 lakh, one needs to know if the builder has subtracted the land cost from it. This, because VAT is not applicable on land. Besides, the builder also needs to separate the cost of labour and raw materials on which the tax has already been paid by him. So, once these components have been separated, the actual cost on which VAT has to be paid by the consumer comes out to be much less," said Vijay. The developers, however, are not disclosing these details due to which there is no clarity on the exact tax liability of the flat owner, said Vijay.
"I fail to understand why consumers think we are extracting money from them. Contractors pay VAT on material cost plus 10% profit method which is acceptable by the government. We suggested our member builders to pay VAT with similar calculation with 15% profit. But a trade circular issued by the sales tax department said this method will not be acceptable. We have no choice but to calculate and pay VAT on agreement value of flats. Besides, there are three different ways to calculate tax which gives a raw deal to customers and a tool to the sales tax department to harass builders," said Rajesh Prajapati, president of the Maharashtra Chambers of Housing Industries, Credai (Raigad), an apex association of builders.
Sudhakar Velankar, founder president of Grahak Hitwardhini, had filed a PIL in the Bombay high court in September challenging the levy of VAT. "Since the matter is subjdice, people are not bound to pay the VAT now. Under no law can the builders compel them to pay up. In case people want to pay, the amount payable should not be more than 1% of the agreement cost, subject to condition that the builder produces a tax invoice," said Velankar.
Velankar also told consumers not to approach the court as individuals or through their housing societies. "They should unite and approach us, we will put up their case," he said.
Besides, consumers can collect special booklets guiding them on what they need to ask their builder. It will be available at the offices of the Sajag Nagarik Manch, the Akhil Bharatiya Grahak Panchayat and the Grahak Hitwardhini from the first day of Navratri.