Published & Updated as on - 2010-03-11
Blaming
the finance minister for failing to provide an overall and clear stimulus to
the housing and real estate sector, the apex body of the organised real estate
builders and developers, Confederation of Real Estate Developers Association of
India (Credai) has said that the imposition of service tax will dampen the growth
of the entire industry.
Credai is planning to meet the
finance minister to request him to roll back the service tax imposed on the
realestate sector. In the context of India’s phenomenal housing shortage of
approximately 24.7 million units and a huge need for space infrastructure to
support its growth, Credai said the Budget has failed to adequately support the
sector and hampered its efforts to reach its potential. Kumar Gera, chairman,
Credai said, “I would say this Budget, by and large, is one in which’
status-quo’has been maintained for the real estate sector.
The
issue of applicability of service tax to all under-construction flats and homes
being booked before their completion will increase the end cost and this will
significantly impact affordability of the home buyer”.
Gera
added that the Budget had also failed to address the larger issues facing the
country, in terms of an urgent need to meet the shortage in housing, which was
last estimated at a staggering 24.7 million units in urban India alone. Despite
the government’s stated desire to address this shortage through a PPP model,
the Budget has made no provision to provide incentives that will attract
private developers to take up more affordable housing initiatives. The high
expectations for a push through incentives for slum redevelopment or slum
eradication schemes in the Budget have also been missing.
According
to a release by the body of realtors, Credai sees two serious flaws in service
tax provision. First, the sale of apartment or commercial spaces is a sale of
immovable property and is governed by the Transfer of Property Act. It cannot,
therefore, also be a service attracting service tax. Second, all states
require buyers to pay stamp duty on the transfer or sale of apartments and
commercial spaces and this ranges from 5-9 % across the country.
The
payment of stamp duty and service tax on the same property constitutes a clear
case of double taxation.The national habitat policy governs the policy of
development of housing in the country, which urges all state governments to
reduce the stamp duty and bring it down to 2-3 %. Imposing a new tax is
contrary to the declared policy of reducing the transaction costs on the sale
of immovable property.
Santosh Rungta, president, Credai,
said, “The issue of applicability of the service tax levied on renting of
commercial property and on under-construction units is a major area of concern
for developers. This tax will be an additional burden and project costs will
shoot up by 4-5%. Consumers, will will be most affected when this increased
cost will be passed on to them. Indirect taxes on raw materials for the
industry will fur there scalate project costs.”
Source: The
Financial Express 10/3/10 |
