SERVICE TAX WILL ADD TO THE COST OF YOUR DREAM HOME

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There were expectations that the above limits may beenhanced to provide some relief to the common tax payer. No additionalconcessions have been provided to the individual tax payers on this front inthe Budget. Some relief though has been provided to the undertakings engaged inbuilding housing projects in respect of extension of time period for completionof such projects and relaxation in norms for built-up areas for shops and othercommercial establishments. It’s, however, important to note that certain proposals onthe indirect tax front could adversely impact the cost of the housing projects andthereby , increase the price of residential units. In this context,following points merit attention: INCREASE IN EXCISE DUTY In general, the standard excise duty rate of 8% has beenincreased to 10% on all goods, including steel, iron, etc. Excise duty onanother main input of a housing project, i.e. cement, has also gone up. Dutyhike in these essential inputs would impact the cost of the construction sincein many cases builders may not be able to claim set-off of duty paid on theseinputs. PROJECTS UNDER CONSTRUCTION Besides duty hikes in essential inputs, the government hasalso proposed to extend servicetax to real estate, including residential units. Through this proposal, thegovernment intends to levy service tax on sale of property by builder to buyerif any part of the consideration for the property is received before thecompletion of construction, i.e. before the receipt of completion certificatefrom the competent authority. In such a situation, the activity of constructionwould be deemed to be a taxable service provided by thebuilder/promoter/developer to the prospective buyer, and the service tax wouldbe levied accordingly. In this context, a question arises from a buyer’sperspective whether buying a housing unit for which he is making payment ininstallments actually involves any service being rendered per seby the builder.Also, it is not clear whether the proposed levy would impact only new projectsor it would even cover the existing projects where booking has already beenmade by the individuals and part-payments made while construction is at differentstages of completion. If implemented , this proposal could lead to increase inprices of the property by about 3.4% of the sale price, and not 10.3% as isbeing generally understood, since service tax on such services is payable onlyon 33% of the value of the property. PREFERENTIAL LOCATION Another major setback has been the proposal to levy servicetax @10.3% on any preferential location charge or other development chargesrecovered by the builder except charges in relation to parking spaces. Most ofthe housing projects have different cost components like preferential charges forcertain apartments due to location advantage. These components may now besubject to service tax. This proposal is also likely to push the cost ofhousing even further. TO SUM UP The levy of service tax on housing projects would increasethe price of the housing units, if the Budget proposals are accepted in thepresent form. One should, however, hope that at best the said proposals aremade applicable to the new projects and not to the existing projects which areat different stages of completion. As most of the current housing projects havebeen delayed beyond any control of the buyer, in the whole bargain, the commonman should not be burdened further. Courtesy: - ET DT: - 18-03-2010 For information about realestate, real estate India, Indian real estate property, property in India,Indian property, apartments, apartments for sale, apartments for buy, apartmentsfor sale in Delhi, apartments for sale in Gurgaon, apartments for sale inindirapuram, flats for sale in Delhi, homes, homes for sale, houses for sale,homes for sale in Delhi, homes for sale in Gurgaon, houses for sale in Delhi,houses for sale in Gurgaon, property investment options in Delhi, investmentoption in real estate, real estate consultant, real estate agents, real estatedevelopers and many more   log on   to http://www.zameen-zaidad.com and http://propertycafeteria.com/          

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