Haryana plans to levy VAT on real estate projects

The Haryana government is planning to impose value added tax (VAT) on the builders, developers and promoters of real estate projects in the state, keeping in view the spur in activity of this sector. The move is aimed to shore up revenues of the state. This tax could see most of the builders falling in its ambit as it is proposed to be levied on any person or entity with a turnover of Rs 5 lakh.

Haryana Excise and Taxation Minister Kiran Choudhry disclosed last week that they have initiated a survey to know about builders who could be the potential tax payers. In the fresh initiative, the tax would be levied only on those developers or builders who construct flats or houses on behalf of the purchasers.

The builders would have two options - they can pay at the rate of 4 per cent of the total project cost, under a scheme of excise and taxation department. Otherwise, the builder may produce bills of all inputs like cement or iron bought for the construction, for calculation of VAT to be paid. However, in the second option, VAT won't be imposed on the cost of land and labour involved in the project. Haryana has different slabs for VAT on goods. It is 5 per cent for iron bar and 13.2 per cent for sand.

If a builder opts for the first option then one would have to pay Rs 4 crore for a project of Rs 100 crore. The amount of the project would be calculated on the basis of turnover of the builder from selling flats or houses.