Moneycontrol
Oct 31, 2012 09:09 AM IST | Source: CNBC-TV18

Bombay HC upholds VAT circular on flat purchase

The Bombay High Court has upheld a tax circular that levied VAT on houses purchased after 2006, reports Ashmit Kumar on CNBC-TV18.


The Bombay High Court has upheld a tax circular that levied VAT on houses purchased after 2006, reports Ashmit Kumar on CNBC-TV18.


It is a big setback today for the Mumbai-based realtors. The Bombay High Court has upheld a tax circular that seeks to impose a 5% VAT on flats that were purchased which in turn were constructed between 2006 and 2010.


The levy of this VAT was in fact first contested in the Bombay High Court and that tussle went on in the Supreme Court. The Supreme Court ruled in favour of the tax department and set a deadline of October 31 for the realtors to clear tax dues. Importantly, the Bombay High Court observed that it was not in a position to consider the extension of the deadline as it had been very clearly stipulated by the Supreme Court.


However, it did provide some relief to the realtors; it clearly stated that this ruling will not come in the way of realtors approaching the state government for addressing this matter.


The bigger question is who bears the brunt, whether it’s the tax payers, whether it’s the buyers of the flat or whether it’s the realtors; that still looms large.

The tax department has made its position very clear, the burden of this payment, the burden of the tax dues lies squarely on the realtors. The realtors on their part have argued that they have very clear provisions which state that additional costs will have to be borne by the buyers.  In the near term with the deadline fast approaching it does appear that this new development is likely to put pressure on their books.

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