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Service Tax Rolled Back To 25 Per Cent

1 Comment Sub Category:Realty News Posted On: Jun 10, 2010

The budget 2010-11 had imposed 10 per cent service tax on under construction property. The property is considered “under construction” till the builder receives a “completion certificate”. According to Source, Service Tax is applicable only on property under construction or where a completed building has not received its occupation certificate. If the entire amount for the property purchase is paid after the receipt of a completion certificate, there would be no levy of the service tax. So, service Tax would not be levied on resale properties. The resale properties would essentially have obtained a completion certificate. Thus, the entire amount paid by them to the builder would be no levy of the service tax.

There is a false impression being created that 10 per cent service tax is levied on the entire value of the consideration which is paid to the builder / developer. Abatement scheme, under notification number 1/2006 dated March 1, 2006, says that the contractor is entitled to claim abatement to the extent of 67 per cent of the value of services rendered by him. Hence the net effect of the tax only on 33 per cent of the value. But recently Finance Minister has rolled back Service Tax to 25 per cent of the value.

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Finance minister has rolled back Service Tax to 25 per cent from 33 per cent in the April session when house discussed and passed the finance bill. According to analysts, the quantum of impact will not be very big. However, it might see developers shifting focus to affordable developments. This has cheered investors and gives some relief for the real estate sector.

According to analysts, the quantum of impact will not be very big. However, it might see developers shifting focus to affordable developments. However, the government seems to have realized that housing affects common man more than anything else, and any harsh measure on that front, may not go down well with the common man ‘aam aadmi’.

Service Tax was imposed, primarily to put a check on speculative buying in real estate. Service Tax is imposed all payments made on property under construction or where a completed building has not received its occupation certificate. Service Tax is applicable on bookings after the notification. So, a buyer who has booked a flat but will get possession only after the notification of the new service need not worry. Its levy will be from the date of notification i.e. July 2010. Those looking to buy a house would do well to book one before July, when the new service tax levy on construction service will come into effect.



One Response to “Service Tax Rolled Back To 25 Per Cent”

  1. Saurabh Maheshwari says:

    Does this mean that flats booked prior to July 2010 but possesion getting now are exempted from service tax.

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