Rs 11.5 cr seized in tax raid on realty firm

Bangalore: The Enforcement Division of the Commercial Tax Department has recovered Rs 11.5 crore from a realtor company in Bangalore. The total tax amount due to the department from the company was Rs 18 crore.

As the company had not paid the dues for two years, service tax and commercial tax enforcement authorities conducted the raids. Rs 11.5 crore towards value added tax was recovered by the commercial tax enforcement authorities and the rest Rs 6.5 crore is subject to scrutiny of records. According to sources, the company has to pay another Rs 8 crore towards service tax and the recovery is in process.

According to Enforcement Division officials, the rate of tax avoidance and evasion is comparatively higher in the real estate industry. The general practice among realtors in the city is to levy VAT on the agreement value or the current market value of a villa or flat, which will also include charges on extra amenities like club membership, parking, common space utility, swimming pool, gym, sports club etc. The buyer ends up paying tax to the builder (seller), but this hardly gets credited to the government.

The Supreme Court recently ruled that VAT can be levied only on the works contract, which includes the cost of materials required for construction – like cement, sand, bricks, crushed stones, iron and steel, wood, toiletries etc, and not on the agreement value or market value of a property.

The commissioner of Commercial Taxes is trying to assess how far a realtor would go to avoid taxes. He is also trying to increase the efficiency of his enforcement and vigilance department, which will keep an eye on tax defaulters. “The department is trying to simplify tax administration for honest taxpayers, and at the same time build systems which will make it increasingly difficult for those who want to avoid and evade taxes.” Ajay Seth, Commissioner for Commercial Taxes, told Deccan Chronicle.

As the tax liability begins from the date of agreement between the seller and the buyer, the department is contemplating on pursuing cases legally and penalising the violators for deliberately prolonging payment of taxes.

The department is also coordinating with the Income Tax Department, Central Excise Department and the Department of Stamps and Registration to corroborate and validate bills and receipts submitted by the sellers to the Commercial Tax Department. They are also appreciating inputs from BBMP and BDA to get clarity on the quantum of land sold across the city.