Haryana Government Notifies VAT At 1%, But Confusion Still Persists

The Property Show on NDTV  |  September 22, 2016

In what comes as a huge relief to developers and buyers in Haryana, the state government, via a recent notification, has fixed (Value-Added Tax) VAT at 1.05% for all real estate projects.

The chronic confusion was put to rest through the introduction of much-awaited ‘Amnesty Scheme’.

–          Haryana government notifies VAT at 1.05%

–          Notification covers projects built up to 31st March 2014

–          Amnesty scheme announced to pay pending VAT dues

–          Developers to refund VAT or adjust it towards property price

Amnesty Scheme 

So far, there was confusion on the issue – with developers using a vaguely-worded tax department notification from 2013 to levy as much as 5% VAT on home buyers. The new notification clearly specifies that VAT above 1.05% should not be charged and this holds true for all projects built up to 31st March 2014.

The ‘Amnesty Scheme’ is government’s much delayed attempt to bring some clarity and allow developers to clear all pending VAT dues until March 2014 through the payment of a lump sum. The scheme has been put into effect from the 12th September 2016 and can be opted for by developers within 90 days of this date.

Excess VAT to be refunded?

In cases where the money collected from buyers for VAT has been kept in a security deposit by the developer, the amount sought can be utilised for settling the liability for more than one year.

Unfortunately, in cases where developers have collected an amount more than 1% in the name of VAT, any excess amount will go to the government with no recourse to the buyer.

However, Parveen Jain, president of national builder body – the National Real Estate Development Council (NAREDCO), has said that where buyers have paid VAT higher than 1.05%, the excess amount could either be refunded or will be adjusted towards the purchase price of the property.

While that is good news for the sector – there is still some confusion about the government notification. For instance, while it mentions the end date as 31st March 2014, it doesn’t specify the financial year from which this rate will be applicable. The notification is also unclear about how and at what rate VAT will be collected on projects that are getting built after this date.

By- Neetika Bajaj

Edited By- Nikhil Narayan Sivadas

With inputs from Kapil Sharma, Joint Partner, Lakshmikuran & Sridharan Attorneys

Amnesty SchemeGurgaonHaryana VATVAT

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