According to the Confederation of Real Estate Developers Association of India (CREDAI), the introduction of a service tax as stipulated in the union budget of 2010 will lead to an uptick in property prices.
The new service tax went into effect on July 1, and for those who may not be familiar with it, a brief overview indicates that this 'deeming provision' was included in the Union Budget 2010, thereby bringing the real estate sector into the ambit of service tax.
CREDAI's president, Mr. Chitty Babu, has projected a property price increase of approximately 2.5% as a result of this tax. It is crucial to note that in regions such as Tamil Nadu, where land registration occurs separately from the sale of buildings, a significant hiatus of 66.3% has been granted, meaning service tax will apply to the remaining balance.
Ultimately, this new tax burden will fall squarely on the shoulders of buyers. Acknowledging this reality, certain developers have admitted that they intend to pass on the additional costs to buyers, thus requiring them to cover the tax expenses.