Builders Cannot Collect Haryana VAT Under Amnesty ?

In what may come as a relief to home buyers in Haryana and as a Big Surprise to Builders, the Haryana Sales Tax Department recently in a Reply to RTI has said that there are no provisions under Haryana VAT Amnesty Scheme to allow Builders to collect VAT from Home buyers / unit holders.

Premium Access – Copy of RTI [add_to_cart id=”8217″]

To Understand more Amnesty Scheme in Haryana VAT, keep reading.

Haryana Government vide Notification No. No 19/ST-1/ H.A. 6 / 2003 / S.59A/2016 dated 12th September, 2016 launched much awaited Amensty Scheme for Developers- Haryana Alternative Tax Compliance Scheme for Contractors, 2016 (hereinafter referred to as ‘Amnesty Scheme’).

The potentially trade smoothening scheme provides Developers/Builders with an option to discharge their Value Added Tax (VAT) obligation at flat rate of 1.05% (VAT + Sur-charge) of the entire aggregate amount received/receivable for the business carried out during the year for the period prior to 31.03.2014.

Note that, The Haryana Government introduced the Composition Scheme for developers in August 2014. Before the issuance for final Notification, a draft notification (Notification No. Web 6/H.A.6/2003/S.60/2014 dated 05/07/014) was issued and the draft copy of Composition Scheme was put in public domain for suggestions from industry and other stakeholders. Incidentally, this time around no such initiation like this has been taken before issuing the, what can be construed as most important scheme in recent years for developers, Amnesty Scheme.

Issue :- Recovery of Tax from Flat Buyers – Allowed or Not?

The scheme fails to answer the question that comes first to every builder’s mind – Can this tax be recovered from Buyers?

The period covered by this scheme is long over and most of the projects have been completed and handed over to their respective buyers. The scheme is completely silent on whether burden of tax can be passed on to the buyers or not. If collection is not allowed, then the tax liability shall burn a hole in builder’s pocket in a market that is already in a slump over the last few years.

In our view, since there is no specific debar to collection of taxes (as in case of Rule 49A) the developer may collect taxes subject to terms of Apartment Buyer Agreement or Agreement to sell between Developer and Buyer.

Now, the HVAT Department has replied to RTI saying that there are no provisions in Amnesty Notification to allow builders to collect VAT from Customers. Indeed there is silence in the notification but in absence of explicit debar, the commercial agreements via BBA are of utmost relevance and shall be resorted to, to identify the who’s and how’s of Liability.