Developers Need Not Refund GST, TDS, Stamp Duty While Refunding Flat Consideration: Maharashtra REAT

The Maharashtra Real Estate Appellate Tribunal has held that a developer cannot ordinarily be directed to refund GST, MVAT, TDS, stamp duty and registration charges paid by homebuyers to Government authorities.

The ruling came while the Tribunal was ordering refund in a delayed housing project dispute.

“We are of the view that the said taxes and duties were paid to the Government. The said amounts are not towards the consideration amount for the subject flat,” the tribunal said.

"With regard to TDS, the said amount is deposited by the allottee directly with the Government and the promoter receives the credit of their advance tax. However, promoter is not liable to refund the said amount because the TDS was submitted to the Income Tax Department, the promoter is not responsible for the refunding it to the allottee. An appropriate recourse is through the tax authority and the allottee can apply for it to the Income Tax Depaftment.” it added.

A bench of Chairperson Justice S.S. Shinde and Administrative Member Shrikant M. Deshpande passed the ruling in an appeal filed by homebuyers Narendra Ramchand Ochani and Jyoti Narendra Ochani against Veena Realcon Private Ltd.

The homebuyers had purchased Flat No.1403 in the “Veena Serenity” project in Mumbai from Veena Realcon Private Ltd. for ₹1,58,75,000 under an agreement for sale dated March 22, 2015, which required possession within 30 months, making September 22, 2017 the contractual possession date.

The homebuyers paid ₹1,43,13,215, including certain TDS payments, towards the transaction, along with ₹15,71,195 towards stamp duty, service tax, MVAT and registration charges.

Although a part occupation certificate was issued on October 12, 2018 covering only up to the 12th floor and excluding the homebuyers' flat on the 14th floor, the full occupation certificate covering the flat was obtained only on April 5, 2021.

The homebuyers approached MahaRERA seeking possession with interest for delayed delivery. MahaRERA initially directed handover of possession with interest on May 23, 2018, but the order was later set aside by MahaREAT on January 28, 2019 and remanded for fresh consideration.

During the remanded proceedings, the homebuyers were permitted to amend their complaint and seek withdrawal from the project with refund and interest under the RERA Act.

MahaRERA eventually directed refund of ₹1,43,13,215 with interest only from September 23, 2017 till April 4, 2021 and allowed deduction of the Covid-19 moratorium period. Challenging this order, the homebuyers approached MahaREAT seeking interest from the dates of respective payments and refund of statutory charges.

Veena Realcon argued before the tribunal that the delay was caused by a dispute between MHADA and the Municipal Corporation of Greater Mumbai regarding planning approvals, and that GST, MVAT, TDS, stamp duty and registration charges, having been paid to Government authorities and not retained by the promoter, were not liable to be refunded by it.

Rejecting the developer's defence, the Tribunal held that the MHADA-MCGM dispute arose after the contractual possession date had already expired and therefore could not justify the delay.

“The date of possession as mentioned in the agreement for sale is sacrosanct and promoter is obligated to hand over possession of the said flat by the due date mentioned in the agreement for sale,” the tribunal held.

It also held that the Covid-19 moratorium period could not be excluded while computing interest.

“The Covid-19 epidemic is not relevant force majeure factor for extending date of possession. Therefore, the promoter is not entitled to the benefit of moratorium,” the tribunal observed.

On refund of GST and MVAT, the Tribunal held that the promoter merely collected those taxes and paid them to the Government. It observed that under the GST framework, the promoter could refund GST by issuing a credit note within the prescribed statutory timeline, but where such adjustment was no longer possible, the allottee would have to seek refund directly from the tax authorities.

It further held that TDS was deposited with the Income Tax Department, while stamp duty and registration charges were paid by the homebuyers in their own names, and therefore the homebuyers themselves would have to seek refund of those amounts from the concerned authorities after execution of the deed of cancellation.

The tribunal refused to directly order refund of statutory dues by Veena Realcon. However, it directed the developer to execute the deed of cancellation within two months and assist the homebuyers in obtaining refunds from the authorities, failing which the promoter itself would become liable to refund those amounts with interest.

The tribunal accordingly modified the MahaRERA order and directed Veena Realcon Private Ltd. to refund ₹1,43,13,215 with interest from the dates of respective payments without deduction of the moratorium period.

For Petitioners (Narendra Ramchand Ochani & Jyoti Narendra Ochani): Advocate Ram Dayal.