Published & Updated as on - 2010-03-29
The Confederation of Real Estate Developers’
Associations of India (Credai) today said it would consider taking the
government to court if its demand for excluding land cost from the proposed
service tax on housing complexes under construction was not met.
“There
is an option of approaching the court and Credai will decide to go to court, if
at least land cost is not excluded from the ambit of service tax... Land is not
at all a service,” Credai NCR President Pradeep Jain said.
Jain,
who is also the chairman of realty major Parsvnath, said the industry body
would convene a national meeting to discuss the option of using legal machinery
if its request was not met when the Finance Bill was accepted.
Realty
developers already pay different types of taxes under various heads, including
stamp duty on land cost and addition of one more tax would only put extra
burden on consumers, he added.
“We had a meeting with the
Service Tax Department and submitted our post-Budget memorandum to officials.
Now, we are seeking a meeting with the finance minister or his officials for
the same,” he said.
Finance Minister Pranab Mukherjee, in
the Budget for 2010-11, brought development of real estate complexes under the
ambit of service tax, unless the entire consideration for the property was paid
after completion of construction.
Finance ministry officials
later clarified that the service tax would be imposed on 33 per cent of the
total selling price, which, the real estate players said, effectively means
about 3.5 per cent cost escalation for the buyers.
When
asked if there was any possibility of revoking the taxation proposal, Central
Board of Direct Taxes member Durgesh Shankar said: “We can’t say anything now
as constant discussions take place for various proposals, but there are never
closed minds.”
He said all proposals were made after due
deliberations and anticipating repercussions also, if any.
Last
week, Urban Development Minister Jaipal Reddy had said his ministry would
approach the finance ministry within a few days for a review of the proposed
service tax on housing complexes under construction as it felt the levy would
hurt the sector, which is yet to recover from the recession.
“The
urban development ministry feels the proposal of service tax made in the Budget
needs review. I am recommending the review of the proposal by the finance
ministry,” he had said.
K P Singh, chairman of the country’s
largest realty firm, DLF, had also asked not to impose service tax at this time
as the sector was not in a “correct shape”.
Source: Business
Standard 29/3/10
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