How would you feel if 3 to 4 years after having booked your flat, you receive a demand for another Rs 5 Lakhs? Shocked? Filled with panic? Well, that’s exactly what thousands of homebuyers are experiencing, thanks to the Value-Added Tax (VAT) department of the Haryana government. It’s been three years since the first notification imposing VAT on housing projects was issued, yet the confusion surrounding the issue has not disappeared.

Governments have come and gone but the VAT confusion in Haryana continues. It all started in 2013 when the tax department under the then Congress government issued an internal memo, saying that VAT has to be levied on the sale of property. But it made a crucial mistake by not specifying how to calculate it. The current BJP government did come out with a draft notification fixing VAT at 1% to 1.5% in January this year. However, it has been almost four months since that happened and there is no clarity when the final notification will come out.

Homebuyers Face The Brunt Of Government Inaction

“I booked my flat in 2011. Five years later, along with the possession letter, comes this communication from the developer that I have to pay him VAT at 5.25%. My flat’s value is around Rs 95 lakh and correspondingly I have to pay around Rs 5 lakh as VAT. I am a pensioner and I never calculated this. So you can imagine what I am going through, how difficult it is for me.” laments Dr. Mahinder Singh, a home buyer.

Similarly, Amit Gupta – a young professional – rues the fact that he bought a home in Gurgaon. “We have already deposited cheques towards VAT. Now again we get this new demand saying that we have to deposit 1% in the name of the assessing authority and issue 3% undated cheques in the name of our developer. Why can’t the Haryana government come out with a clear policy? This is pure harassment,” says a disgruntled Amit.

It seems that the BJP government is dragging its feet on the issue, and it’s the homebuyers who are left bearing the brunt.

Developers Move the Courts; Yet Confusion Persists

Fed up with waiting for the government to clarify matters, CHD Developers moved the Punjab and Haryana High Court in 2014 to get some clarity on the issue. As per its ruling in May last year, the Court directed the Haryana tax department to amend the definition of ‘sale’ in order to include the transfer of property in goods involved in immovable property and exclude value of land for levy of VAT. But this has not happened as yet and so the confusion continues.

In a recent twist that will make matters worse, the Haryana tax department has assessed the VAT liabilities of developers like the Rahejas and Tulip Infratech at 8% and 10.5% respectively. This obviously means that the homebuyers will have to shell out that much more for their homes.

This is the clearest indication yet that the Haryana tax department is disconnected with the situation on the ground, choosing to instead focus on maximizing collections and revenues, no matter the cost.

Reporter: Oineetom Ojha, NDTV
Web Editor: Nikhil Narayan Sivadas, NDTV