CREDAI urges government to abolish the levy of VAT

The Confederation of Real Estate Developers of India (CREDAI) has urged to abolish the levy of Value Added Tax (VAT) on property transactions.

CREDAI’s request comes in wake of a Supreme Court order in September last year making it mandatory for payment of VAT on property purchases in the State made from 2006 to 2010.

Shantilal Kataria, Vice President, CREDAI, Maharashtra told a newspaper that the latest blow to buyers has come from consumer rights group, Grahak Hitvardhini which has withdrawn its writ plea in Bombay High Court against the levy of VAT.

He said as a last resort, the builders’ lobby has insisted that developers should be asked to collect 1 per cent VAT on the sale cost instead of the construction cost.

“We have requested the sales tax commissioner to offer a more practical composite parallel scheme under which buyers have to pay 1 per cent VAT on the sale cost. This will be simpler compared to payment of VAT for an under construction flat. A decision on this is expected in the next two weeks,” said Kataria.

City-based developers till now have collected VAT from almost 40 per cent out of total flat buyers whose property transactions took place from 2006 to 2010. CREDAI’s request is based on the fact that property being immovable should not attract this tax, said Kataria.

CREDAI Maharashtra

“The writ plea by Grahak Hitvardhini was withdrawn almost two weeks back. If the State government does take a decision now, then, buyers will be forced to pay VAT. We have been fighting for buyers’ rights since 2006 and even went to Supreme Court against levying of VAT,” said Kataria.

Reacting on the recent 5 to 10 per cent increase in property prices as per the new ready reckoner rates announced by State government on Tuesday, Kataria said the calculation method for ready reckoner should be made more project specific than price zone centric. He said CREDAI will express its view on ready reckoner after studying it properly.