Thursday, August 30, 2012

VAT on flat is double taxation, says Consumer ‘FORAM’


 For flat owners in Maharashtra, the VAT battle is not yet over!

VAT on flats, or material used on construction, amounts to double taxation since the developer has already paid while buying them from registered suppliers, said Mr Atul Puranik, convener of newly started consumer group FORAM – Flat Owners’ Rights protection Action committee of Maharashtra.
FORAM sought legal opinion from noted advocate and tax law consultant mr. Anand Patwardhan who opined that the entire scheme of VAT on flats, shops and bungalows should be challenged. Developers, while fixing the price of the properties, would have factored all their expenses, including the costs of the land and material and taxes that they pay.
“Mr Patwardhan’s view is: In such a situation, why should the government charge VAT again on developers who ultimately pass it on to the consumer like it happens in any transaction,” Mr Puranik said.
Hence, it is wrong to expect developers to pay VT from their pocket since they too will pass it on to buyers, Mr Puranik said and pointed out: “The Sales Tax department is giving conflicting and confusing statements on liability for flat buyers.
Mr Patwardhan opined: “To the best of my knowledge, VAT will be applicable on sale/resale of goods under the sale of goods act. Builders will have to declare and explain the cost of material that has been used before working out any formula of collection of VAT from buyers.”
Referring to the latest set of FAQs issued by the Sales Tax department on the VAT issue, Mr. Puranik said the points are very confusing. “At one stage the department says the onus is on developers and somewhere else it says developer has to collect from the buyer,” he said.
For instance question number 17 and the answer are:
“Question: The builders receive non-refundable deposits and other charges under the agreement such as electricity deposit, water charges, legal charges, development charges etc. Whether such receipts will also form part of sale price for VAT?
Ans: The amounts which are received as deposits will be a deduction to the extent such amounts are actually paid to other authorities”
This is a clear indication that the consumer will have to shell out the tax, Mr. Puranik said.
He said, similarly, to Question number 19 in the FAQ list 19 on whether the VAT applicable can be collected by raising a debit note or the same should be mentioned in the agreement itself, the answer very clearly  is: “Yes. It can be collected by raising a debit note. Specific mention in the agreement is a choice of the contracting parties. It will be payable on the installments received.”
He said developers might have got a respite from the Supreme Court for depositing VAT with the government, but they have begun to send out notices to buyers citing the clauses in agreements for sale that provide for payment of any future taxes to be levied by the government or municipal bodies.
“The government must immediately make its position clear and clear the confusion,” he said and appealed to NGOs and consumer welfare organizations all over Maharashtra to join the campaign against VAT and protect ultimate buyers from the VAT burden.
The issue arose after the Sales Tax department issued a trade circular calling for payment of 5% VAT on properties sold between June 20, 2006 and March 31, 2010 following the dismissal of a developers’ plea against VAT by the High Court. Now, the Supreme Court, hearing a special leave petition by developers, gave a relief to developers to pay the tax by October 31, 2012 instead of the government deadline of August 31.

Tuesday, August 28, 2012

FORAM to fight VAT bombshell on Aam Admi


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”.
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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.

Thursday, August 23, 2012

VAT Bomb on Flat Buyers in Maharashtra


Flat buyers, be prepared for another round of taxation!.  
Developers are all set to serve notices on those who purchased flats between 2006 and 2010 for payment VAT with the Maharashtra Government deciding to levy the tax with retrospective effect at 5% of the value.
This follows the rejection of developers’ appeal by Bombay High Court on behalf of the buyers against the heavy VAT. MCHI-CREDAI and CREDAI-Pune Metro have moved the Supreme Court with a special leave petition which is pending hearing.
Meanwhile, the State Government issued a circular for payment of VAT on flats, shops and bungalows sold by developers between 20.06.2006 & 31.03.2010 at the rate of 5%.
The State wing of developers’ apex body CREDAI Maharashtra today issued a public notice stating:  “As per the government circular VAT has become applicable to the flats purchasers from June 2006.”
Flat Out! Representative Picture
Sample this: the new burden on a customer who bought a flat at Rs 50 lakhs works out to minimum of Rs 2.5 lakhs!
Commenting on the new levy, Mr Atul Puranik of Centre for Fair Business Practices said: “This VAT burden is just too much. The cost of living is going up every day and the high rate 5% VAT plus the penal interest is going to cripple the common man further. We appeal to the government to scrap VAT on sale of flats altogether and give much-needed relief to the customer”
The Maharashtra Government had imposed a 5% VAT on flat sales following the example of Karnataka following the order of the Supreme Court in the case of  M/s K. Raheja versus Karnataka Govt.
This led to an anomaly as the taxation system followed in Karnataka is totally different from the one prevailing in Maharashtra. 
Unlike Maharashtra, Karnataka does not have the ‘Ownership of Flat Act’ and therefore developers in that State prepare two separate sets of documents –one for the share of land on which Stamp duty is levied and another on construction on which no stamp duty is paid.
The Maharashtra Government subsequently reduced VAT on sale of flats to 1% from April 1, 2010. The government, however, is now levying 5% on the flats bought between 2006 and 2010, throwing thousands of buyers into a fresh financial crunch.
Thus, each flat buyer in Maharashtra will have to pay up to 5% additional taxes for flat purchased by them, as compared to Karnataka, along with interest @15% p.a. and penal interest @ 25% that the Maharashtra government is levying. This news has rattled flat buyers who are already reeling under the pressure of 3.09% Service Tax which has been implemented by Central Government.
Meanwhile, various developers are gearing up to send notices for collection of outstanding VAT tax to Consumers who have purchased flats between 20.06.2006 and 31.03.2010.
All agreements for sale provide for collection of additional taxes levied by the Centre or State governments from the buyers. 

Developers do not enjoy sitting on inventory in cash crunch: CREDAI



  • Housing price cut not feasible in high cost regime, says CREDAI
  • Plea to FM: Take steps to boost realty, affordable housing
  • Remove roadblocks like high rates of interest
  • Renew faith in the economy by encouraging real estate


NEW DELHI: Instead of asking realtors to download unsold stock at discounted prices, the Union Finance Minister P Chidambaram should take immediate steps to boost to housing stock supply through special incentives to the affordable segment, developers apex body CREDAI said.
Commenting on reports suggesting that Mr Chidambaram asked commercial banks to pressurize developers to clear inventory and lower the prices to get the economy running, CREDAI national President Mr Lalit Kumar Jain said: “We are happy that at last the Government has realized that real estate kick-starts the economic development.”
He described the reported figure of unsold housing stock of 500,000 across the country as unrealistic.
“We ourselves have asked member developers to start selling even at rock bottom prices as long as three month ago since nobody would like to block his capital by sitting on unsold stock that too in a very high interest regime. On the one hand, banks are discouraged to lend to real estate developers while on the other cost of fund from non-banking sources is prohibitively high,” Mr Jain said.
Mumbai Realty: A representative picture
CREDAI has also volunteered to work with the Indian Banks Association on the proposed committee on housing sector which was mooted by the Finance Minister.
The current size of the real estate industry is estimated to be about 180 Billion USD with a CAGR of 18-20%. For the past two years, however, liquidity in general and access to bank credits in particular has been restricted due to variety of risks. Therefore, just as any other sector of economy, the real estate sector has also found it difficult to tap bank resources, bank credits.
It estimated that out of the huge investment in the organized real estate industry funding by the commercial banks is negligible. Banks and finance companies are still wary of financing Real Estate sector as RBI always keeps it in the negative list.
“It is ironic that while home loans area top priority, the home developers are not,” Mr Jain regretted.
Referring to concerns over prevailing high prices of houses, he said it is akin to the typical egg-and-chicken scenario. The general sentiments in the market and economy are preventing buyers to move and developers are unable to bring down the prices because of very high cost of construction. Hence the demand-supply mismatch continues with the housing shortage crossing the 26 million mark.
The other key factors that add to the high cost of realty are the ever increasing local municipal taxes, ready-reckoner rates for deciding stamp duty, cess and even VAT.
For instance in Mumbai, the financial and real estate capital, the burden on developers has risen on account of fungible area. The cost of labour has gone up by as high as 60% over the past two years.
“CREDAI, therefore, appeals to Mr Chdamabaram to look at ways to bring down the cost of construction while taking steps to encourage buyers to have houses of their own,” Mr Jain said.
“As things stand, it is unrealistic to expect developers to cut down prices of even of some of the unsold stock as they had already incurred the high cost and it does not make business sense for us to go out of pocket,” he explained.
CREDAI, humbly requests the honourable Finance Minister to focus government attention on bridging the demand-supply gap by lowering the rates of interest and enhancing faith in the economic conditions of the country.
In a related development CREDAI has requested the Indian Bankers Association to involve the developer community apex body in the banks’ advisory committee on housing which the finance minister suggested.
“Being given to understand that the Honourable Finance Minister of India has asked the Indian Bankers Association to form an advisory committee on Housing that would advise the government on the ways and means to check the slowdown in the sector, CREDAI has volunteered to work with IBA,” Mr Jain said.
“Sir, as you are well aware that the Realty Sector is undergoing very hard times.  Stocks are piling up, debts and financial defaults are rising, and the sector is shrinking due to adverse market conditions, high cost of inputs, tight monetary policy and large burden of taxes,” CREDAI communiqué to IBA  Chairman Mr Alok K Mishra said.
“A Delegation of CREDAI is ready to meet IBA to present a holistic picture about the contemporary Housing situation and its issues in order to strike the necessary balance and ensure optimal efficiency in the developmental process of the country,” said the letter dashed out by CREDAI Chairman Pradeep Jain and Mr lalit Kumar Jain himself.
CREDAI pleased for declaring housing as a priority sector at par with infrastructure and suggested that home loans be given at 7% for the low income groups and economically weaker sections. Similarly, the margin money contribution for availing home loans should be reduced to 15% from the prevailing 20 to 30%.
CREDAI suggested a roll-over provision for loans to real estate.  The NPA norms should also be modified to allow this accommodation by the banks, housing finance institutions and financial institutions.
Banks should be encouraged to fund the developers with fresh infusion of funds on a priority basis to enable them complete on-going projects, CREDAI said and called for removal of the disparity in risk weights: Risk weight assigned to Real Estate projects should be reduced at par with other industries for the purpose of credit-disbursal by banks.
Similarly, CREDAI said, banks should facilitate land loans as part of the project cost, particularly when the land is purchased in an auction/bidding from Government/Municipal authorities.
Pointing out that banks and HFIs are enjoying certain concessions on loans up to 20 lakhs under priority sector loans, CREDAI called for upscaling the limit to at least Rs 35 lakhs due to the rising inflation and considering the urgent requirement of credit in the housing sector.
CREDAI also suggested to banks to give priority to affordable housing segment – homes with up to 1,000 sqft carpet – and allow project funding up to 40% of the cost, inclusive of land price.
Calling for amending the Foreign Ownership rule, CREDAI said the government could consider the feasibility of permitting pre-approved foreigners from a certain list of countries to own a house in India, just as Indians can buy houses abroad.





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Saturday, August 11, 2012

Who gave them this Azad? Press Club condemns attack on media by 'Assam protesters'


The Press Club, Mumbai , today condemned the attacks on media persons and the destruction of their equipment and vehicles by crowds of protestors gathered at Mumbai’s Azad Maidan on Saturday.
The Secretary, Press Club, Mumbai said in an e-mailed statement that the protesters, led by the Raza Academy and others claiming to represent Muslims, had massed in the afternoon to voice their dissent against atrocities committed on Muslims in Assam and Burma.
Police fighting it out, literally, with Assam protesters at Azad Maidan
According to eyewitnesses, a Maulana, in his speech, verbally attacked the media claiming that the atrocities in Assam and Burma were deliberately not being covered by the press. This incensed the crowd who turned against photographers and TV crews on and around the maidan. In the rioting that followed by the mob, 3 O.B. vans of TV channels were burnt and gutted while nearly as dozen photo journalists were beaten and injured. Two persons were killed and a large number of policemen and public property was destroyed. Of the media men injured, Prashant Sawant of ‘Sakal Times’ and Vivek Bendre of ‘The Hindu’ were seriously injured and have been admitted in St. George’s Hospital. Most of their cameras were either lost or damaged beyond repair.
The Press Club deplores this action by the protestors of attacking media persons. Those covering the agitation had no views for or against the issues being raised and were professionally acting as messengers of the news. This is nothing but an attack on democratic institutions and these groups have no right to vent their frustration on innocent professionals involved in news coverage.
The incident also highlights the fact that the Mumbai Police were caught napping. The police were fully aware of the emotional nature of the issues being raised, but there was hardly any bandobust to control the situation. It was only after more than 30 minutes of full-scale rioting that the police reinforcements came and brought the situation under control. The Press Club demands that the Maharashtra government immediately order an enquiry to determine how the violence erupted and punish those responsible for it. Action must also be taken against those police officers who allowed the situation to become uncontrollable. The club also demands the cost of damage to lives and limbs and to the media equipment be recovered from the perpetrators of the violence.
The Press Club is also seriously concerned at the current trend of protesting and advocacy groups targeting and attacking media when they find that their demands are not met by the authorities. In recent days, the Anna Hazare camp had similarly lampooned and attacked media persons for playing down the numbers attending the Anna Hazare rallies. It again brings to the fore the long-standing demand for legislative protection against attacks on journalists, which has been stone-walled for over 2 years by the Government of Maharashtra.