Haryana VAT Circular dated 10.2.2014 on Builders – Takes a U-Turn on Valuation under Composition scheme to hurt the Builder’s and Property Buyers by Including the Land Value in the Total Taxable Value

Haryana VAT has released a circular yesterday which amends the earlier circular No. 952/St-1 dated 7-5-2013 regarding the valuation of taxable value under composition scheme. The brief details of which are as under:-

As per Para 3.1 of Earlier circular No. 952/ST-1 of HVAT dated 7-5-2013,

“3.1Where a builder or developer has opted for payment of tax on his turnover relating to transfer of property in goods involved in execution of works contract under the composition scheme as provided under Section 9 of the HVAT Act, the total consideration on which such dealer is liable to tax would not include the amount received from the customers towards their undivided share in land. However, as explained earlier, in the case of joint development projects this exclusion would not be applicable. Further, deduction is allowable towards amounts paid to sub-contractors as per the provisions of the HVAT Act.”

Now, a fresh circular No. 259/ST-1 dated 10.2.2014 amends the para 3.1 (above-produced) in the following manner:-

“3.1 Where a builder or developer has opted for payment of tax on his turnover relating to transfer of property in goods involved in the execution of works contract under the composition scheme as provided under Section 9 of the HVAT Act, read with rule 49 of HVAT rules, he would be liable to pay a lump sum tax calculated at the rate provided therein (presently at the rate of 4%) on the total valuable consideration receivable for the execution of the contract. This would be applicable to all types of agreements and there cannot be allowed any deduction from the total valuable consideration on any count even for the land. 

It is further made clear that in the light of the provisions contained in section 2 (w)(input tax) and 2(zs) (vat dealer) such a composition dealer cannot claim the benefit of any input tax paid on purchase of goods used in the execution of work contract.”

Clearly this amendment has few clear interpretations:-

a)    The amends clarifies that the land component unlike previously clarified will now have to be included in the taxable value for composition scheme in all types of agreements.

b)    Secondly, the part of deduction allowable toward amount paid to sub-contractor as per provisions of HVAT Act has now been silenced.

Link to latest circular No. 259/ST-1 dated 10.2.2014 

Link to the earlier circular No. 952/ST-1 of HVAT dated 7-5-2013

Read Other Articles from CA Ankit Gulgulia (Jain)

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About the Author : CA Ankit Gulgulia (Jain) –  Author is practicing Chartered Accountant in New Delhi and specialising in Indirect Taxes, Corporate Laws and Transfer Pricing. He can be reached at ankitgulgulia@gmail.com or +91-9811653975

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3 responses to “Haryana VAT – A Hurting Amendment to Builders and Property Buyers”

  1. Pankaj Singh yadav says:

    Hi,

    Can you pls share the calculation of VAT in Haryana with some example. My builder is asking to pay VAT on my all payments I made till 31-March-2014 and calculating VAT on all demand amount and Taxes on that. Is it the way how VAT is Calculated or it should be calculated only on amount before any tax applied on amount.
    Pls share the info.

  2. CA Ankit Gulgulia (Jain) says:

    Yes, the present circular only amends the earlier one in regard to the composition scheme (Para 3.1) which governs the valuation mechanism under Rule 49 r.w. Section 9 of HVAT Act,2003.

  3. Dr. Arun Draviam says:

    The author will do an yeomen service if he could clarify that the present notification affects only composition schemes and not normal transactions of transfers where no tax evasion is involved.

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