MUMBAI: Seeking to fight the vexed VAT issue on flats in Maharashtra, a consumer group called FORAM – Flat Owners’ Rights protection Action committee in Maharashtra – has been formed with consumer interest groups coming together.
FORAM will mobilise public opinion against the VAT on flats sold between 2006 and 2010 which has come like a bolt from the blue, said Mr Atul Puranik, convener of the new platform.
“As it is, the common man is burdened with a series of taxes and a homer buyer has to pay even much more in terms of service tax, stamp duty and registration and now the VAT,” Mr Puranik, who is associated with the Council for Fair Business Practices, pointed out and called for an immediate end to VAT on housing sector.
Mr Puranik said there is no justification for levying axes on the material used in housing since all these items are subjected to sales tax. VAT, actually, amounts to double taxation, he said.
Mr Chandrashekhar Soman, another convener of FORAM, said:”We will mobilize public opinion against all over Maharashtra with district level committees VAT and appeal to the government to scrap the tax altogether for flat buyers.”
“This is just the beginning,” he said and expressed the hope that people a cross section will join in the movement.
Stating that FORAM will raise voice on behalf of the common man, Mr Soman said there was no justification for VAT on property because buyers pay stamp duty and service tax. He asked: why should there be VAT on immovable property?
He pointed out that there was a lot of confusion on the percentage of VAT to be levied and “even the government officials come up with different figures”.
e
FORAM received support from elected representatives like Mr. Vivek Patil, MLA from Uran. Many consumer rights activists and advocates promised to lend a helping hand to the anti-VAT drive.
“I was shocked to read about the Maharashtra Government’s announcement to charge VAT at a high rate of 5% on flats and other properties bought from 2006 to 2010,” said Mr Patil commenting that: “I strongly feel it is very, very exorbitant.”
“Several people who chose to buy flats in Raigad district because of the price advantage as compared to Mumbai and its suburbs have approached me with this new VAT issue. “My fundamental question is: why should there be VAT on immovable property? VAT should totally be scrapped be it 1% as applicable from April 1, 2010 or the high rate of 5% from 2006 to 2010,” Mr Patil said.
Echoing similar views, Mr Patil pointed out that the common man is being “crushed” by the government policies both by the central and state Governments. “The uncontrolled increase in prices of essential items like food, electricity and petroleum products, along with taxes on everything that we buy had made the life miserable for many,” he said.
Business Brunch 
Its an indeed double taxation, steel, cement are already under VAT, so builders might have paid VAT already while purchasing material. Then why we again need to pay VAT on already taxed material? Builders are collecting VAT with 5% of agreement value, where as rule/law says that it should be on material used and not on agreement value. Builders haven’t kept any proper book keeping for the same and hence they are demanding 5% VAT (composition scheme) even though there are 2 other methods (actual deduction & standard deduction) to levy tax which can be very very lesser than 5%, as it involves deduction of land cost, labour, other services (architect fees, engineering services, electric wiring, legal fees etc). While Mr.Ajit Pawar states that this tax to be paid by builders, but didn’t state anything about “not to recover this from buyers” which puts buyer in confusion and insecurity. Provided lesser cost of construction material from 2006 to 2010, buyers must be liable to pay very less taxes. Agreement clause is very unclear as its standard clause which states that all taxes needs to be paid by buyers. With this definition even a toilet can become taxable. If this case was pending since 2006 then agreement shall mention it clearly with probable amount to be paid upfront, but this is not the case. While builders are still free to enjoy their profits as they are likely to recover their paid VAT from buyers and buyers will be left in pieces due to this excessive tax burden, which came crashing down from no where. As I am sure very few buyers were knew about this case, while others were kept in total dark by builders and developers. So govt. of Maharashatra is actually asking people to pay taxes defaulted by builders which is not at all fair.