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 21.02.2014
No. Trade Trade Cir. No. 7T of 2014
Sub: Revised returns to be filed by developers.
Ref: 1. Hon’ Supreme Court judgment in the case of M/ s. Larsen & Toubro Limited & Anr. September 26, 2013.
2. Amendment to Rule 58 of the Maharashtra Value Added Tax Rules, 2005 by notification no. VAT 1513/CR 147/Taxation-1 Dt. 29-1-2014.
3. Hon’ Supreme Court order in Special Leave to Appeal (Civil) 14153 of 2013 on 31st January 2012.
1. The constitutional validity of the amendment to section 2(24) of the Maharashtra Value Added Tax Act, 2002 was challenged by the Maharashtra Chamber of Housing Industry and others by way of the Writ Petition bearing number 2022 of 2007 filed before the Hon Bombay High Court. The Court by its judgment dt. 10th April 2012, upheld the constitutional validity of the amendment made to the definition of the word “Sale”.
The Maharashtra Chamber of Housing Industries (MCHI), 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 issue has finally been decided by the Hon Supreme Court and the Court upheld the Constitutional validity of the amendment made to the definition to the word “Sale”. However,
a) Hon’ Supreme Court in para 115 held that “It may, however, be clarified that activity of construction undertaken by the developer would be works contract only from the stage the developer enters into a contract with the flat purchaser. The value addition made to the goods transferred after the agreement is entered into with the flat purchaser can only be made chargeable to tax by the State Government.”
b) Hon’ Supreme Court in pares 124 directed the State Government that “the mode of valuation of goods provided in Rule 58(1A) has to be read in the manner that meets this criteria and we read down Rule 58(1-A) accordingly. The Maharashtra Government has to bring clarity in Rule 58 (1-A) as indicated above. Subject to this, validity of Rule 58(1-A) of MVAT Rules is sustained.”
In order to give effect to the Supreme Court judgment, amendment to Rule 58(1) and (1A) of the Maharashtra Value Added Tax Rules, 2005 was carried out by notification no. VAT 1513/CR-147/Taxation-1 Dt. 29-1-2014. The amendment to this rule is effective from 20th June 2006.
2. The Builders Association of India and Maharashtra Chambers of Housing Industry moved an appeal to Supreme Court against the judgment of the Bombay High Court dt. 30th October 2012 thereby challenging the two trade circulars- Trade Circular 14T of 2012 dt. 6.8.2012 and 18T of 2012 dt. 26.9.2012 issued by the department. The Circular 14T of 2012 dt. 6 August 2012 provided for the grant of administrative reliefs to developers and contains the frequently asked questions (FAQs). The Circular 18T of 2012 dt. 26 September 2012 clarified the options available to developers for discharging the tax liability. It was clarified that no method apart from statutorily prescribed in the rules would be admissible. It stipulates that developers would have to discharge their tax liability by selecting any one option among four options available under the Maharashtra Value Added Tax Act. It was specifically mentioned that the cost plus gross profit method should not be adopted by the developers.
3. The Supreme Court while dealing the appeal against the judgment of the Bombay High Court dt. 30th October 2012 wherein the two Trade Circulars 14T of 2012 dt. 6.8.2012 and 18T of 2012 dt. 26.9.2012 issued by the department were challenged, passed an order on 31st January 2014, stating that SLP filed against Writ petition 2440 of 2012 is disposed with a liberty to challenge the notification dt. 29th January 2014. The Court clarified that if the petitioners filed revised returns in terms of the amended rule 58 of the Maharashtra Value Added Tax, 2005 then such returns shall be examined by assessing officer appropriately in accordance with law.
4. In view of the above, it is necessary to give some time to Developers to file revised returns for the period from 20th June 2006 to 31st December 2014. Therefore it is decided that the returns filed by Developers, for above period may be revised by 30th April 2014. In case of assessed periods, the developers may make their claims before the appellate authority. In case where the assessments are cancelled u/s 23(11), they can make their claim before the assessing authority passing the fresh order of assessment. It is also made clear that revised returns can be filed even where notice of assessment is received.
5. It is needless to clarify that the Developers have to discharge their tax liability by selecting any one option among four options available under the Maharashtra Value Added Tax Act. No other option (such as Cost Plus Gross Profit method) apart from statutorily prescribed under the MVAT Act would be admissible.
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.