Realty gets dearer in Mumbai with 1% VAT

Mumbai: If you’ve booked your new flat, here’s the bad news. You will now have to pay 1% of the sale price mentioned in the agreement as value-added tax (VAT). Maharashtra finance minister Sunil Tatkare has decreed that VAT on under-construction property will be levied at this rate. Thus, if you have booked a flat for Rs50 lakh, you will have to dish out Rs50,000 as VAT. This tax can be paid through the builder or online.
The good news is that the levy, which takes effect from April 1, brings clarity to the calculation of VAT on under-construction property sales. In the earlier dispensation, the effective VAT rate on under-construction property varied depending on the level of setoffs available on taxes already paid on inputs like cement, steel, labour, etc. After the setoff, the effective cost to buyers worked out to about 2-3%. Now, this figure is a clear 1% with no setoffs.