CA CA Sumit GroverSumit Grover

In Sep’13, Hon’ble Supreme Court in case of L&T held that the construction activity by builders pertaining to sale of flats prior to completion certificate are also subject to levy of VAT.

The said verdict opened a Pandora Box regarding valuation for the periods prior to the date of judgment.

To resolve the dispute, Vide N/N 19/ST-1/H.A.6/2003/S.60/2015, dated 23rd July’15, rule 25 of Haryana VAT Rules, 2003 (determination of taxable turnover for non-composition scheme dealers) has been amended and the said amendments have been made enforceable retrospectively from 17th May’10 onwards. The gist of the changes has been produced herein below:

♣ Deduction of cost of land & other chgs related to land— Highest of following:

o   Separate deed for land with the intended buyer entered ——-   registered value of land;

o   Separate deed for land with the intended buyer not entered ——-   Notified circle rate of land existing at the time of agreement;

o   Cost of land unascertainable—- 25% of total value ( & 40% in case of commercial buildings)

o   In case of part transfer out of total area, the cost of land needs to be calculated on pro-rata basis.

♣ Deduction of labour, service & other like charges:

o   Proper records maintained—- Actual basis;

o   Non-maintenance of books of accounts—- 25% of total consideration. And while computing this his portion of 25%/40%, shall be calculated on [total consideration less cost of land transferred];

Valuation of work carried out by developer for land owner in case of Joint Development Agreements shall be highest amongst follows:

o   Actual value of construction (including profit) transferred by contractor to landowner;

o   Registered Value of Land (i.e. for the purpose of Stamp Value) less consideration paid by contractor to landowner, in cases wherein proportionate land is transferred by land owner by way of separate deed;

o   Circle rate of proportionate land at the time of agreement less consideration paid by contractor to landowner

However, the value derived hereinabove shall not be less than circle rate of construction applicable on the date of agreement.

  • Tax shall be payable at the time of receivable or actual receipt, whichever is earlier.

For the sake of convenience, the said notification has been enclosed herewith- Download Notification

For other articles by CA Sumit Grover, please refer link hereinbelow:

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April 2021