Got 5% VAT bill on flat? Ask builder for breakup

Levy Unfair As Tax Between 0.5% And 3%, Say Activists

Mumbai: Property buyers who have been handed a 5% value-added tax (VAT) bill by builders can ask them for a breakup of the amount as the state government has repeatedly clarified that the tax cannot be more than 0.5% to 3% of the total agreement value. 
    Condemning the "unfair practice", consumer activists have said that developers are including their profit margins and interest costs in the computation and passing off the entire chunk as VAT. 
    They have asked flat buyers to seek redressal from the Council for Fair Business Practices (CFBP). Anand Patwardhan, former president of Consumer Guidance Society of India and now legal advisor at CFBP, said, "Buyers should ask for the breakup to see how developers have arrived at the VAT amount. This is unfair.'' 
    CFBP's vice-president Hoshang Billimoria added the government's decision to levy VAT on those who bought property between 2006 and 2010, itself, is unfair. "Secondly, since the government has clarified the VAT amount, developers must not ask for 5%. Consumers can complain to us; we will try to resolve the issue.'' 
    Developers in the city, Navi Mumbai and Thane have been sending letters to buyers saying they have to pay VAT to the sales tax department before October 31. "We have written to our customers to keep a provision for tax dues of 5%, as there is still confusion in the state government on VATcomputation... We will soon know the quantum of tax to be paid by flat purchasers. If the amount paid is more than that computed, it will be refunded,'' said the spokesperson for D B Realty. Wadhwa Group has made a similar promise. 
    Lodha Group has sent out a demand letter. Others such as Mayfair and Ekta Group have already collected 5% VAT and kept the amount in escrow accounts or obtained bank guarantees. Some have told buyers that of the 5%, they will pay 2.5% in protest while the balance will be kept in fixed deposits, the interest on which will be payed to flat buyers. 
    Buyers, though, remain far from reassured. "How am I going to shell out Rs 1.75 lakh, which is 5% of the flat agreement of Rs 35 lakh,'' said a designer who bought a 1BHK flat near Dindoshi, Goregaon (West), four years ago. 
    "I bought this Rs 1 crore flat two and half years ago after emptying all my life earnings and taking a 10-year home loan. The only way I will be able to pay the Rs 5 lakh VAT is by taking another loan. The thought is daunting," said an architect, a Bandra resident. 
    While developers have promised refund, they are yet to decide on the interest on the huge amounts parked with them. Vimal Shah, MD, Hubtown, said, "These are issues on which we hope to take a decision by the month-end. If the government refunds the money with interest, we will give that interest to the customers... Developers are seeking 5% of the agreement value as there is no clarity on the computation of VAT.''