Real Estate India: How much VAT should be paid?

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Question asked by Mr Moorthi Subramaniyan from Bangalore:

Hi Vatsala,

I am Moorthi, recently I got registered my flat in a small apartment (it has 12 flats) in Bangalore.

My agreement with builder is Rs. 9L for land cost & Rs. 21L for construction (including electricity, water, registration etc).

My question is, How much VAT I need to pay (based on 4%)? Can you help me on this?

Regards
Mr. Moorthi Subramaniyan
Bangalore

Vatsala Answers:

Service tax will not be attracted for a complex where the total number of Apartments is 12. Regarding the VAT liability, it may not be payable on the entire amount of Rs.21 lacs. Definitely the amounts charged towards cost of registration and obtaining electricity and water connection should qualify for abatement. On the balance amount, the builder has two options for collecting VAT, viz., either the compounding option or the actual value option. If he prefers compounding option then the VAT is payable on the balance amount at 4% in Karnataka. If the builder chooses collecting VAT on the entire balance amount because it is more beneficial to him, then it is payable at 4% to 12% (depending on the construction material) on actual value added after taking credit for the VAT suffered on the inputs. While you cannot force the builder to choose a particular option, if the builder does not go for compounding option, then you can apply compounding rate of 4% on the balance amount as aforesaid and compare the same with the VAT charged by the builder and check whether it is more favorable.

Vatsala
http://www.atoneplace.com

For more information, kindly visit at Real Estate India or Online Real Estate Video.

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