Office of the Commissioner of Sales Tax 8th floor, Vikrikar Bhavan, Mazgaon, Mumbai 400010.
No. Build-Devep/Adm. Relief.06-10 /Adm-8 Mumbai, dated 04-01-2014
Trade Circular No. No. 1T of 2014
Sub: Audit Report to be filed by developers in form 704 for 2012-13.
I. The Maharashtra Chamber of Housing Industries (MCI-II), Promoters and Builders Association and 10 other petitioners filed Special Leave Petition(SLP) before the Hon. Supreme Court against the order of Hon. Bombay High Court (Writ Petition no. 2022). The Supreme Court has decided these petitions by its common order dt. 26/ 09 /2013. The Supreme Court while upholding the Constitutional validity of the amendment to the definition of Sale of MVAT Act, has clarified that
(i) ” The activity of construction undertaken by the developer would be works contract only from the stage when the flat purchaser enters into a contract with the developer and that the value addition to the goods transferred after such agreement can only be made chargeable to tax by the State Government.”
(ii)The Court has further stated that, “taxing the sale of goods element in a works contract is permissible even after incorporation of goods provided tax is directed to the value of goods at the time of incorporation and does not purport to tax the transfer of immovable property. The mode of valuation of goods provided in Rule 58(1A) has to be read in the manner that meets this criteria.” The Court has directed the State Government of Maharashtra to bring clarity in Rule 58 (1A) as indicated above.
2. In order to give effect to the Supreme Court judgment, it is necessary to amend Rules 58(1) and 58(1A) of the Maharashtra Value Added Tax Rules,2005. The amendment to these rules is under consideration. However, it may take some time to effect the amendment.
3. The prescribed date for filing the report of the audit under section 61 in Form 704 for the financial year 2012-13 is 15th January 2014. In absence of amendment to rule 58(1) and rule 58(1A), it may not be possible to complete the audit of developers.
4. In view of the above, it is administratively decided that if an Audit Report in form 704, pertaining to developer for the period 2012-13, is filed within one month from the due date i.e. on or before 15th February 2014, then penalty u/s 61(2) shall not be imposed.
If any member of the trade has any doubt, he may refer the matter to this office for further clarification.
Commissioner of Sales Tax, Maharashtra State, Mumbai.