Are you planning to buy a new flat near Metro line, Monorail line or any other major infrastructure project in Mumbai? If yes, then be ready to cough up an additional 10 % additional development tax on property transactions in such areas.

The residential and commercial properties could get costlier as the state government is contemplating a 10% development tax on property transactions in such areas. The logic is that properties in these areas will command a premium once the projects come up.

Chief minister Prithviraj Chavan has asked the Mumbai Metropolitan Region Development Authority (MMRDA) to send a proposal to the state planning commission on how this tax should be levied. The move comes after the MMRDA complained that its resources were getting depleted and there were no new avenues of revenue generation.

The MMRDA plans an initial one-time 10% development tax on the ready-reckoner value. This tax will have to be paid while registering the property in new developments or existing structures. While 7% of the tax is likely to go to the MMRDA, the remaining 3% will go to the civic body. A final decision on the move will be taken by Chavan, said the sources.

However, the move has evoked a strong reaction from home buyers. Prakash Ojha, who is looking to buy property near Pratiksha Nagar Sion from where Mono rail passes, said, “ In fact, no Development tax should be levied at all as all such services are already chargeable. Already salary classed employees are paying more than their portion as taxes which are deducted at source, hence such a move is despicable, he added.

“It will be very cruel, unfair and inhuman if development tax is levied in addition to the other duties and taxes like stamp duty, registration, vat and service tax”, said Suresh Mirajdar, an executive working with an MNC in Goregaon. Instead of imposing this tax on new home buyers, it should be spread over the entire population in the form of increase in the monthly maintenance tax payable by all the flat owners.

Agrees Monal Patil: the benefits of the development like monorail, metro line , mumbai trans harbour link is for all and not only for the new home buyers. If it is a burden then it should be passed on to all and not the new entrant only. Old residential flat owners already have the advantage of having bought the property at lower rates and majority of the existing home owners need not necessarily be the actual users and can also be investors. The government should look at it from the point of view of the new property owners, she said.

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.