Levy of VAT on Sale of Flats in India
The activity of construction is liable to Value Added Tax (“VAT”) on “the transfer of property in goods involved in the execution of a Works contract”, under the extended definition of Sale, pursuant to introduction of Article 366(29A) by the 46th Amendment in the Constitution of India.
This blog considers the issues arising when a person goes and buys a flat or a commercial property from a builder; is it a “Sale”, and can the activity be amenable to a levy of VAT? The controversy emanates from the decision of the Hon’ble Supreme Court in K. Raheja Development Corporation [141 STC 298 (S.C)], wherein, it was held that if the Agreement is entered into after the flat or unit is a [...]
Issues involved in Taxation of Construction contracts
There is a lot of mystery regarding taxation of Construction activities in India. The mystery starts from the fact that a Construction contract involves both labour and material and hence, both Service tax and Value Added tax is levied on one transaction. The process becomes more complex depending upon a number of factors such as the Scope of work, the nature of the contract, whether the contract includes any further sub-contracting, whether individual prices have been specified for each part of the scope of work and whether the contract involves off-shore and on-shore activities etc.
Let us first consider the Indirect taxes applicable on a Construction contract. As already stated [...]
