CHD Developers Limited, Karnal petitioners Vs the State of Haryana

Honable Punjab and Haryana High Court has upheld the levy of VAT of developers so long there is contract between developer and the purchaser and construction activity undertaken on behalf of purchaser by the developer after entering into the contract. The Honable High Court settled the question of law after analyzing the detailed legislative history and judicial precedents including Honable Apex Court Ruling in M/s Raheja & M/s L&T matters.

However on determination of taxable turnover for the purpose of levy of VAT Honable High Court has held that (i) Cost of Land and any expenses prior to the entering of the Contract between developer and purchaser will not be includible in the taxable turnover and based on affidavit filed by the state directed necessary changes in the Rule 25 of the HVAT Rules to make it more harmonious with the taxing powers under the constitutional provisions and (ii) the value of the goods which can constitute the measure of the levy of the tax has to be the value of the goods at the time of incorporation of goods in the works even though property in goods later.