VAT demand from RPS Infrastructure in relation to work contract

[hitesh2687]

Hi,

Has anyone received VAT demand notice from RPS?
In demand notice they have mentioned that they have challenge demand notice or assessment order from Govt. But in meantime we need to pay VAT amount.

Is there any thing which we can do because if we don't pay it will result in invocation of Bank guarantee.

Notice received on 4th Dec and we need to pay by 20th Dec.

Thanks,
Hitesh Gupta
9540067690
Unit in RPS Savanna Tower 1

[amolbh]

Hi, I too have received the same.
Earlier they asked for a bank gurantee but now they want the money. I dont understand why.
Do you also get demand for 1% cess amount as well?

Are you going to pay them?

[hitesh2687]

No I have not received any demand related to cess.Is this demand form part of allotment letter or final demand.

I am not sure, as there demand letter states that they have already filed an appeal against assessment order.

Has anyone else have received demand related to VAT?

[amit.nagpal]

I have got the final demand letter and VAT is an integral part of it @ 3.25%.

Amit

[sirohionline]

1
VAT
After Supreme Court Decision of
20th September 2013
1. By the order dt. 26/09/2013, the Supreme Court disposed of 26 Appeals, 14 from Karnataka and 12 from Maharashtra on the subject matter of Value Added Tax, levied on the transaction of sale of flats under construction.
2. M/s. Larsen & Toubro had filed an appeal on the subject matter VAT which was heard by two judge bench of the Supreme Court. The Bench expressed its differences with the earlier decision of 2007 by the Division Bench in K. Raheja Developers Vs. Karnataka State and referred the matter for review of the earlier decision to the larger bench. The larger bench was constituted under Justice R.M. Lodha and two other Judges. This bench, therefore, considered all the matters pertaining to VAT including the appeals filed by the builders of Maharashtra on the Bombay High Court Decision of April 2012.
3. Thus this Bench had two issues for its consideration (1) whether the decision given in 2007 on K. Raheja Developers needs revision and (2) The constitutionality of the amended Sec. 2 (24) of Maharashtra Value Added
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Tax Act 2005. The Bench decided both the issues in favour of the State Governments and dismissed all the appeals.
[3] From the Consumers / Flat Purchasers point of view, this judgement is very important for the following issues – namely,
A] The Builders are declared statutorily liable for the payment of VAT to the State Government.
B] The Agreements under Maharashtra Ownership Flat Act. 1963 or 1970, are declared Works contract for the levying of VAT.
C] The date of Agreement to sale is to be considered for the levying of VAT. The work to be carried out or completed after the date of Agreement is chargeable for VAT. The work completed prior to date of Agreement is not chargeable for VAT.
This rule renders any demand of VAT amount made by the Builders illegal if it is calculated on the basis of average of VAT amount payable on the entire project.
Those Flat holders, who have paid the VAT amount as per the demand of the Builders and whose Agreement to sale is registered on or before 31st March 2010 and after 20th June 2006, need to lodge a complaint with the Commissioner of Sales Tax for excess demand / payment of VAT amount. The purchasers lodging a complaint can claim refund of excess amount paid directly from the state Government.
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D] Those flat holders who have entered into a sale Purchase Agreement on or after 1st April 2010 can be subjected to payment of VAT amount at 1% of the value of the Agreement, provided that the Builder was registered under MVAT Act on the date of Agreement, and also with reference to the date of Agreement.
However this 1% rate will apply only to that part of the value of the Agreement which pertains to the work incomplete on the date of Agreement. The work completed prior to date of Agreement can not charged for the VAT even under the Composite scheme of VAT.
E] In the PIL 142/2012, which is scheduled for admission hearing on 23/10/2013, we have raised issues as under,
A) The constitutionality of Sec. 42 (3) A of the MVAT Act. 2005.
B) Whether the Builders, unregistered on the date of transaction can collect VAT from the flat purchasers ? And
c) The rate of VAT and the calculation of VAT under Rule 58 (1) and 58 (1) A of MVAT Act. 2005.
Out of these three issues, the constitutionality of Sec. 42 (3) A stands decided by the Judgement Order dt. 26/09/2013 of the Supreme Court. The issues pertaining to the applicability of VAT in terms of the provisions of MVAT Act. 2005 remains unresolved and can be decided by the Bombay High Court in PIL 142/ 2012.
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4. The main question in everybodys mind is what is the impact on Flat Purchaser of the decision of the Supreme Court. This question has to be answered with variation in the facts of each sale Purchase Contract and Therefore, there can not be a uniform impact on all Flat Purchasers.
5. Before we consider the impact on Flat Purchasers we will have to consider the impact on the State Government and The Builders, which will be tried to be transferred on Flat Parchasers.
The Builders will have revise their returns filed on or before 31st October 2012 and restructure them on the basis of the each sale – purchase contract of individual Flat. This is hurculeon task and can take quite some time. Mean while Builders will definitely put pressure on the State Government to revise the scheme of taxation for the period 2006 – 2010. Considering the complicated system of calculation of tax and difficulties in assessment, as also the impending elections, the State Government may consider the proposal of the Builders favourably.
6. Meanwhile the Builders may put tremendous pressure on the Flat purchasers to pay VAT amount. The Flat Purchasers should demand the calculation of VAT amount based on his personal contract. Unless Builders
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give such calculation, no payment be made to the Builders.
We are trying to engage some Chartered Accountants to help Flat Purchasers in verifying the demand of the Builders Such help shall be for fees to the Chartered Accountants.
7. We have taken, right from August 2012 very consistant stand in regard to VAT which stands vindicated by the Judgement of the Supreme Court. The issues pertaining to the calculation and applicatity of VAT in terms of MVAT Act 2005 are pending before the Bombay High Court in PIL 142/2012.
8. To Summerise,
A] The Supreme Court Judgement has ruled that the VAT is applicable to all transactions of Sale of Flats under Construction.
B] The issues pertaining to the applicability and the authority of the Builder to recover VAT amount from the flat parchasers are pending before the Bombay High Court and to the extent, subject to admission of PIL, the matter is subjudice.
C] Unless the Builders give revised calculation of VAT amount no Flat purchaser should pay VAT amount to the Builder. Those who have already paid VAT amount to the Builder should file a complaint with the Sales Tax
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Commissioner for excessive demand / payment of VAT amount.
9. Thus, de jure the position and liability of the Builders and Flat Purchasers have changed but de facto the situation remains the same, that is DO NOT PAY VAT AMOUNT TO THE BUILDER AND IF AIREADY PAID FILE A COMPLAINT WITH THE SALES TAX COMMISSIONER.
29th September 2013 Sudhakar Velankar
Grahak Hitvardhini
09850758305
sudhakarvelankar@gmail.com

[sirohionline]

Builders can't pass on VAT to flat buyers: Supreme Court
This is good news for those who have bought property between June 2006 and March 2010. The Supreme Court on Thursday said Value Added Tax (VAT) cannot be imposed on buyers.
This has come as a jolt to builders in the state who wanted 1% tax instead of 5% imposed by the state government in 2006. They were recovering the VAT amount from buyers.
Justice RM Lodha upheld the Bombay high court order that VAT cannot be imposed on buyers.
“The value of goods which can constitute the amount to be taxed has to be the value of the goods at the time of incorporation of goods in the works even though property in goods pass later. Taxing the sale of goods element in a works contract is permissible even after incorporation of goods provided tax is directed to the value of goods at the time of incorporation and does not purport to tax the transfer of immovable property,” the court observed.
The court also directed the Maharashtra government to bring clarity in Rule 58 (1-A) — relating to VAT rules.
“We respect the Supreme Court verdict but we will study the judgment only after we get a copy. The taxes imposed by the government have always been passed on to the buyer. We will not pay from our pocket,” said Sunil Mantri, vice president Naredco, CMD Mantri Realty.
“Imposing 5% VAT under section 42(3) of MVAT on flat purchased during June 20, 2006, to March 2010 would impact consumers. The SC verdict will lead to disputes between developers and buyers,” he added.
Builders’ association CREDAI had approached the apex court after the Bombay high court rejected their plea to impose only 1% VAT. In 2006, the state government imposed a VAT of 5% on constructions made between 2006 and 2010. The move resulted in an additional tax liability on flats, shops and bungalows sold by developers between June 20, 2006, and March 31, 2010.
“Whatever VAT amount the developer has recovered, will now have to be returned to buyers with interest,” said a consumer activist. “If they don’t, then we will move court.”

Advocate general’s stand
The apex court recorded the statement of advocate general of Maharashtra that clearly stated that implementation of Rule 58(1-A) shall not result in double taxation and in any case all claims of alleged double taxation will be determined in the process of assessment of each individual case
Developers will have to pay 5% VAT, rules Supreme Court
MUMBAI: In a major setback to realty developers , theSupreme Court has upheld the earlier Bombay High Courtverdict that asked builders to pay 5% value-added tax for sale of underconstruction houses between 2006 and 2010 in Maharashtra.
The Supreme Court had clubbed all 26 appeals under consideration on this issue together . Of these appeals, 14 were from Karnataka and 12 from Maharashtra. The verdict will mean that developers in states such as Maharashtra, Uttar Pradesh and Karnataka where VAT has been levied on such transactions will have to pay the charges.

"We do not find any error in the view of the (Bombay) High Court in this regard," said the order passed by the threejudge division bench. The bench comprised Justice RM Lodha, Justice J Chelameswar and Justice Madan B Lokur .
"Moreover, the Advocate General for Maharashtra clearly stated before us that implementation of Rule 58(1-A ) (of Maharashtra VAT) shall not result in double taxation and in any case all claims of alleged double taxation will be determined in the process of assessment of each individual case." MVAT rule 58 (1-A ) provides for deduction of expenses on labour and service charges for the execution of the work related to the goods that has already been transferred.
"Wherever the agreements have been clear on the levy of VAT, developers will be able to recover their payments. However , there could be a rise in issues between developers and home buyers where agreements were silent on the VAT levy and who will bear these charges," said Hitesh Jain, senior partner, ALMT Legal.
Given that the property market between 2006 and 2010 was witnessing a boom with an exception of around 15-18 months, tax collection from Mumbai and Pune alone may surpass even . 1,000 crore, experts said. In 2006, the Maharashtra government had imposed a 5% VAT on apartments sold following an order of the Supreme Court in the case of K Raheja versus the government of Karnataka .
The Maharashtra government subsequently reduced VAT on sale of flats to 1% from April 1, 2010. In 2007, the realtors had received a stay on the circular asking them to pay 5% VAT since June 2006. Last year, the Bombay High Court had dismissed the plea filed by Builders Association of India.

Take a intelligent decision . Ask for a Supreme / high court letter

[sachdevarajesh1]

Does it mean anything for us..those who have paid 14% VAT...Not sure so asked it specifically

[shashi1234]

Hi,

I also got demand notice against VAT from RPS.

As per letter, I visited RPS office to enquire about the same.

I have been shown a demand notice cum assessment order in support of their VAT demand @ 3.25% raised upon them by Tax authorities. A summon of department asking to pay the demand is also shown to me.

As per RPS, an appeal has been filed against the assessment and they assured in case of any benefit, the same will be passed on to us.

I have heard that one of developer Omaxe Ltd. is charging VAT @ 3.90% on sale value. Please update.

Shashi Goel

[hitesh2687]

Hi Sashi,

Does this mean we need to pay vat @3.25%? Or RPS official advise you of any other way out.

Please advise. What's is your opinion.

[sachdevarajesh1]

Hi, I am at OSV. Omaxe is charging VAT as 14%, which will now be 14.5% after swach bharat cess.. Not sure why different builders are charging differently. Regards

[bir]

Hi,

I have also received a demand notice for VAT @3.25% along with 1% Cess payable by 20th dec-15.

Can anyone suggest what to do…..


Regards,

Birendra Kumar
9716299546
T-7-Savana

[deven1101]

After the supreme court judgement in Maharashtra case , it was indicative that State govt can impose VAT on under construction property as it can be treated as contract between buyer and seller.

1. Materials used after date of agreement(BBA) till the possession to be under VAT.

2. After this judgement various states started VAT on under construction property
Haryana Govt too came with composite VAT scheme w.e.f 1-Apr-2014 which clearly states that 1% VAT can be imposed on total sale value or registry value whichever is higher. It means no VAT before 1-Apr-2014 registries.

3. But RPS along with other builders moved to high court to be registered under regular VAT dealers , rather than composite scheme of Govt of Haryana citing examples of few states (Different states have different rules).

4. In high court parties were Builder vs Govt and we flat buyers were no wheres , anyway High court allowed them to register under regular VAT dealers rather than scheme of Govt of Haryana.

So that 1% became 4%. Non transparent calculations because each buyer have entered into different dates on agreement and only Materials used on his unit after date of agreement to be treated under VAT.

Also there is supreme court ruling they can not pass on VAT to customers .
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Following can be challenged ->
1. why consumers will pay 4% instead of 1% though 1% scheme still exists and is for developers only.
2. Why consumers will pay pay for cases where possession received before 1st Apr-2014 which was clearly mentioned by Haryana Govt itself.
3. Why VAT passed on to consumers who booked flats before 1st April 2010 as per supreme court ruling.
4. Why VAT on total sale agreement when after booking and possession only paint/polish done(In my case my fresh booking with builder and possession took less than a year and only paint polish done).
5. Why VAT demand for period 2010-2011 to residents who booked only in 2012,2013 itself.

Flat owners need to jointly fight legally , now fight to be builder vs buyers .

Regards,
Devendra Pandey
T-8/107

[hitesh2687]

Hi Devan - Thanks for sharing useful information.
Can we please decide next step, payment date I.e. 20th Dec is approaching fast and in case of non payment it will result in Bank Guarantee invocation.

Not sure what to do, I have booked my flat in Aug'12.

Thanks,
Hitesh
T1-1202
9540067690

[hitesh2687]

Thanks Devender.....
I have fwd an email to RPS and they told me that they have agreed with RPS protestor to make payment by 07th Dec.
Please advise next action plan. Happy to join protest with RPS residents.

Thanks,
Hitesh
9540067690

[amolbh]

Has anyone paid the VAT amount?
Or, if there is a plan to handle this situation?