CREDAI response on Finance Bill 2010
Mr. Kumar Gera, Chairman of CREDAI shared, “We appreciate the government’s gesture in increasing the abatement from 67% to 75%. This would mean that the service tax charged on the cost of apartments would go down to about 2.5% from the earlier proposed 3.3%. We however feel that the method of calculation for the same is unjust as land, the biggest component in the cost of a residential unit, should not be taxed as a service. In the present proposal, the abatement given (where cost of land is included in the price of the apartment) will be unjust. To illustrate, if there are two identical apartments – one is priced at Rs. 3000/-per sq. ft. and the other at Rs. 15000/- per sq ft. Prices vary only due to the location (and therefore the value of land). The service tax amount in one case will be Rs. 75/-per sq ft and in the other case Rs. 375/-per sq ft. As the service element is the same in both cases. How is this variation just? The fine print, when available, will hopefully address these issues.
This process will lead to complications and also pose difficulties for the buyers in understanding how and what they are being taxed for.
The applicability of the tax on projects that are under construction currently is also a matter which requires clarity. Home buyers as well as developers at the moment are not sure if they will be taxed fully or partially for bookings already made on under construction projects.
The practicality of implementing this tax will also face hurdles as the provisions and methodology for issuance of completion certificates vary across states.
It is also worth mentioning that with the Goods & Services Tax (GST) expected to be introduced soon; this action looks unnecessary and would invite further complications when the GST is brought into effect.”
It is the apex body of the organized real estate developers/builders across