Haryana VAT - Tax on Builders - Land value to be included - Explosive Clarification
IN a big blow to the Construction Industry and property buyers, the Haryana Taxation Commissioner has clarified on 10th February 2014 that under the composition scheme, the tax has to be paid on the total valuable consideration receivable for the execution of the contract and no deduction will be allowed on any count - even for the land.
This is exactly opposite to the clarification given by the Commissioner just nine months ago. In his Memo. No. 952/ST-1 dated 7-5-2013, in para 3.1, he had clarified as:
"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 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."
Now, by the latest Memo No. 259/ST-1 dated 10.2.2014 the para 3.1 (reproduced above) is substituted with a new para as:-
"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."
This clarification is bound to travel to other States and ultimately the Centre and will influence Service Tax and GST, if any.