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Builders to pay 5% VAT on leased out, sold, rented property

  • Bhaskar News
  • May 14, 2011, 04:41 AM IST

Bhopal: Builders across the city should prepare themselves to shell out more money for paying taxes.

Commercial Tax Department has issued new rules for the builders that build and sell or rent out houses.
Builders will now have shell out five per cent Value Added Taxes (VAT) on their constructions.

Finance Minister Raghawji announced the VAT on such builders. The department also included those builders who give the buildings on lease instead of selling them in the list of builders who will give the tax. Builders that have older buildings will also pay VAT on lease earned after April.

The cost of a land will be calculated on the basis of the rate when it is purchased by a builder. This rate will be increased by one per cent every month.

Builders’ Association to approach HC

The builders’ association plan to challenge the new taxes. Former chief of Builders’ Association Sunil Moolchandani said the association will approach Madhya Pradesh High Court. He argued that VAT cannot be levied on real estate. The builders pay the registration fees and service tax. They cannot be asked to pay VAT as well, he added.


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