Tax Despair
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Tax Despair

With the imposition of service taxes on all under-construction projects from July 1, 2010, home prices to escalate by 2.5 per cent.

In the face of India’s acute housing shortage, the Government’s declaration to levy service tax on all under-construction projects from July 1, 2010, comes as a clear shocker. As Santosh Rungta, President, CREDAI, says, “The government is contradicting its own policy. On the one hand, it aims at reducing the stamp duty for the sale of immovable property, in order to make home buying affordable while on the other, it is levying service tax, which simply defeats the purpose of the aforementioned point.”

The provision is definitely going to make a bigger hole in the consumer’s pockets considering that housing will cost 2.5 per cent more in both cases of pre-bookings in under-construction properties as well as purchase of finished apartments. Rungta further adds, “The sale of an immovable property is governed by the Transfer of Property Act and should not have been under the ambit of services. This will now create confusion resulting out of double taxation in the form of payable stamp duty on the transfer or sale of apartments.”

Rajesh Vardhan, Managing Director, Vardhaman Group, rues, “Over the last few years, buyers have been moving towards affordable housing. At such a time the industry needs the government to undertake measures which will assist in boosting demand for both, commercial and residential projects. However, this policy does not reflect the same thought process.”

CREDAI has already filed petitions with the Finance Ministry for exempting the housing sector from applicability of Service Tax. Let’s wait and watch!

With the imposition of service taxes on all under-construction projects from July 1, 2010, home prices to escalate by 2.5 per cent. In the face of India’s acute housing shortage, the Government’s declaration to levy service tax on all under-construction projects from July 1, 2010, comes as a clear shocker. As Santosh Rungta, President, CREDAI, says, “The government is contradicting its own policy. On the one hand, it aims at reducing the stamp duty for the sale of immovable property, in order to make home buying affordable while on the other, it is levying service tax, which simply defeats the purpose of the aforementioned point.” The provision is definitely going to make a bigger hole in the consumer’s pockets considering that housing will cost 2.5 per cent more in both cases of pre-bookings in under-construction properties as well as purchase of finished apartments. Rungta further adds, “The sale of an immovable property is governed by the Transfer of Property Act and should not have been under the ambit of services. This will now create confusion resulting out of double taxation in the form of payable stamp duty on the transfer or sale of apartments.” Rajesh Vardhan, Managing Director, Vardhaman Group, rues, “Over the last few years, buyers have been moving towards affordable housing. At such a time the industry needs the government to undertake measures which will assist in boosting demand for both, commercial and residential projects. However, this policy does not reflect the same thought process.” CREDAI has already filed petitions with the Finance Ministry for exempting the housing sector from applicability of Service Tax. Let’s wait and watch!

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