CREDAI Seeks Removal of Service Tax on Under-Construction Housing Complexes
A Memorandum of Concerns has been submitted by the Confederation of Real Estate Developers’ Associations of India (CREDAI), a prominent real estate industry body, to the Ministry of Finance. The appeal seeks the removal of service tax on housing complexes currently under construction.
Key Discussions and Concerns
- CREDAI Chairman, Kumar Gera, emphasized that the memorandum outlines the industry's concerns and suggestions, which were formulated in consultation with KPMG, their knowledge partner.
- The document was submitted to Y G Parande, Member (Budget), Finance Ministry, with the hope that the government will understand the issue and take necessary corrective steps.
- According to Gera, the imposition of service tax on real estate development will lead to a net loss of revenue for the government, rather than generating substantial income.
Background on the Service Tax Announcement
- In Budget 2010, Finance Minister Pranab Mukherjee announced the imposition of tax on housing complexes under construction.
- Later, officials clarified that the service tax would be levied on 33% of the total selling price, which real estate players interpreted as a 3.5% price escalation for buyers.
Implications as Per CREDAI
- The organization believes that levying service tax on complex constructions is impractical, as it would inadvertently favor the secondary market of completed projects.
- CREDAI hopes for a reconsideration of this policy to support the development of under-construction housing complexes.