Flat Owners Now to Pay VAT to Builders

The latest entrant in the list of costs involved in buying is that VAT or the Value-Added Service Tax.

A VAT of 5 percent will be slapped on builders, which will eventually be paid by the buyers. VAT was introduced in 2006 but has been made applicable from 2008 in a circular issued by the sales tax (ST) department.

The department had proposed VAT on purchase of new flats in 2006. It was to apply on under-construction projects or where occupation certificate had not been issued.

VAT is not applicable for ready to move in flat that have been booked after 2006. It was applicable only on under-construction projects and those which had been booked but for which occupation certificate had not been issued.

Builders had opposed the proposal for the fear of reduction in sales due to the increase in the cost of a flat.

Builders who have not yet charged VAT from flat-buyers have included a clause in the sale deed that if the government insists on VAT, then the customer has to pay from his pocket.