5% Vat to be levied on flats bought between 2006 & 2010

The Maharashtra Govt has decided to collect VAT (Value added tax) from home owners who bought their under-construction homes directly from builders between June 2006 and March 2010.The value of VAT has been decided as 5% of the total agreement value. This amount will have to be paid before August 31st.

Eg: A buyer who bought a flat worth 2 crores from a builder between June 2006 and March 2010,will now have to pay 10 lakhs as tax before 31st August 2012.

This tax is not valid for resold apartments (flats bought from a previous owner).

Flats sold after April 2010  will be charged only 1% VAT and 3.75% Service Tax.

Note : There is No Service Tax or VAT levied on completed projects with OC (Occupancy Certificate).

Flats with more than 2000 sq ft or 1 crore price will be charged 4.5% Service tax along with 1% VAT.

Maximum amount of flats were sold between 2006 and 2010,when prices were at an all time high. Builders have been assigned the task to collect the money from the buyers.
Failure to do so will invite penalty.

A sales tax officer said that during the recent raids on builders, it was noticed that the builders had collected this money from the buyers but had not deposited it with the sales tax dept. The department expects to collect 800-900 crores by this.

Further clarifications on VAT on flat purchase:
VAT is liable on the total cost of construction of a flat or the agreement value,whichever is lower. So basically,if you purchased a 1000 sq ft flat and the construction cost is 1200 per sq ft,then the VAT you have to pay is 5% of Rs 12,00,000 i.e. Rs 60,000.

There is a further update on VAT on house purchases.
The govt is in consultation with various depts to come to a conclusion regarding the formula for calculating the VAT. Before any decision is arrived at, the builders should not harass buyers into coughing up 5% vat. In absence of any conclusion by the committee, the developers can charge between 0.5% and 3% VAT if at all necessary.

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New property tax rate for Mumbai passed by BMC

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The new property tax calculating formula has been passed by the BMC.This calculation will now be based on the value of the property rather than the rent which it can earn in a year (which was the earlier formula).The result of this change will mean no change for flats less than 500 sq ft but for newer properties it can mean double the property tax than before.
These proposals were passed by the BMC standing commitee on Thursday,10 May,2012.
According to the new formula,the property tax rate will be multiplied by the Capital value of the property to arrive at the property tax.
According to the BMC,the new method will cause an increase in 19% percent of properties.Rest will remain unaffected according to them.Earlier even the ward officer could increase or decrease the property tax if he saw it necessary,but this will not be possible anymore.

According to them,the new tax will fetch 32,000 crores against 3200 crore at present.

The new rates of property tax will be the following :-
Residences (with metered water connection):0.41% of capital value
Offices:1.95% of capital value.
Banks:3.91% of capital value.
Illegal buildings (without OC or water connection):8.44% of capital value.

The capital value of a property will be determined by four factors : price, area, age, and the type of property.

The proposal is yet to be passed by the General body of  BMC.However,the first hurdle has been cleared.

Sourced from newspapers like DNA,Times of India and online resources.

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