Industry body Assocham has asked the government to roll back the service tax proposed on real estate developers at the time of construction, as it would increase the tax burden on home buyers and impact the recovery of the sector. The government, in the Budget, said that real estate complexes will attract service tax, unless the entire consideration for the property is paid after the construction is complete.
In its post Budget memorandum to the Finance Ministry, Assocham had said that the real estate sector was gradually returning to normalcy and imposition of service tax on immovable property would increase the cost of housing by four per cent.
“In addition, it would also make the entire housing facility costlier to end-consumer and will be contrary to government’s aim of providing affordable housing,” it said The levy of service tax on preferential locations will also increase the cost of housing, it said.
“Therefore, withdrawal of service tax amendments makes a sense as the total incidents of taxation on real estate sector would exceed 30 per cent if the suggested service tax withdrawal is not done,” it said.
Earlier this month, the Finance Ministry had ruled out rolling back of service tax on real estate developers.
“Construction is a service. As a service, there is no reason why it should not be taxed,” Revenue Secretary Sunil Mitra had said, adding it is only 3 or 3.5 per cent that gets added up for the buyer.