As per the budget proposal for 2010-11, the finance ministry has suggested service tax on construction and sale of property. The contractor was entitled to claim abatement to the extent of 66.7 per cent of the value of services rendered by him. But recently, the Finance Minister has increased the concession on service tax applicable to construction of residential complexes from 66.7 per cent to 75 per cent of gross value of property, including land value.
Suppose you are buying a flat costing Rs. 50 lakh (cost of land, Rs. 40 lakh, cost of construction, Rs. 10 lakh). As per the 2010 budget, the applicable service tax was supposed to be Rs. 171,495 calculated at 10.3 per cent on 33.3 per cent of property value. With the amendment announced by the Finance Minister, the applicable service tax comes down to Rs. 128,750 calculated at 10.3 per cent on 25 per cent of property value. Thus, the savings will be Rs. 42,745.
The Finance Minister has also declared exemption from service tax for low-cost housing segment (less than Rs. 20 lakh). Suppose you are buying a flat in a smaller city for Rs. 18 lakh (cost of land, Rs. 6 lakh, and cost of construction, Rs. 12 lakh). With the amendment announced by the Finance Minister, there would be no service tax applicable.
The notification will be published in July 2010. Till issue of notification, there will be no service tax for under construction property. Property Buyers can pay amount for property and service tax will not be levied till July 2010. After issue of circular or notification, Service tax will be applicable only for under-construction properties and not for resale property.
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Tagged abatement, affordable housing, concession on service tax, construction and sale of property, exemption from service tax, low-cost housing segment, news, property news, real estate news, resale property, Service Tax, under-construction properties
Confederation of Real Estate Developers’ Associations of India (CREDAI) a real estate industry body submitted a memorandum to the Finance Ministry concerned with the appeal for removal of service tax on housing complexes under construction. The Chairman of CREDAI, Kumar Gera stated that they have put forth their concerns and suggestions and also discussed the probable impact of the provisions with the Ministry.
According to Gera, the money collected through the imposition of service tax on real estate development will not be big enough, rather it would majorly lead an overall negative sentiment and a net loss of revenue. In budget 2010,Service Tax is imposed on 33 per cent of total selling price.
According to CREDAI, it was an impractical proposal to levy service tax on under construction complex since it would lead government giving preference to the secondary market of completed projects. An understanding of the problem and required corrective steps will be taken is a hope from the government. The list of recommendations was built in consultations with KPMG, its knowledge partner and was submitted to Y G Parande, a Finance Ministry Member (Budget).
On the back of a revival in demand, real estate developers are again building super luxury apartments, say experts. About 7,000 such apartments to be delivered within a year in Mumbai alone by consultancy firms Jones Lang Lasalle Meghraj (JLLM) and Knight Frank India.The cost is not below Rs 4.7 crore for a single unit. Anand Narayanan, Knight Frank India’s national director (residential agency) said in the central business district of Bangalore,400 high-end luxury apartments are going to hit the market in the current year itself.
LLM country head and chairman Anuj Puri said “After the recession got over, real estate developers are back building high-end super luxury projects because there is good demand for such projects.” Similar high-end projects are coming up in the National Capital Region as well, but demand for such projects depend on many things, including the location of the property and its novelty.The higher cost of such products is justified because not a single one has a common design and lay-outs are also never identical, the consultants said.
Stating that there is ‘enough demand’ for such projects, both consultancy firms said that consumers are treating such projects as a consumer product for which they are ready to pay a premium.
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Tagged Bangalore, building high-end housing, Delhi NCR, developers are back building high-end housing, high-end projects, Jones Lang LaSalle Meghraj, Knight Frank, Mumbai, real estate, Real estate in India, real estate news, super luxury apartments
Lucknow Municipal Corporation (LMC) has decided to attach the properties of erring house owners and forfeit them to recover the tax. The Corporation have been sending reminders to defaulting property owners for the past many years.LMC would soon begin the exercise of attaching the properties, and forfeiting them to recover the pending dues. The LMC would also seize the bank accounts of the defaulting property owners, in an exercise which is set to begin within a period of a week.
There are over a dozen government buildings, residential and commercial property owners who owe massive dues towards the municipal body. The combined dues of all government buildings in the state capital are estimated to be around Rs 20 crore. Urban development sources said that a recent survey has found that Lucknow has some 6 lakh odd houses, even though only some 4 lakh houses are covered. Comprehensively, the dues of Rs 30 crore could be significant given the fact that the total house tax earning of LMC happens to be in the range of around Rs 80 crore.
A senior official in the department said that the tax is either under-assessed or is not assessed at all. The municipal body has now started issuing revised tax to the house owners.In fact, the municipal corporation has drawn a list of some 150 such owners — both residential and commercial — whose outstanding house tax dues have sky-rocketed to a whopping Rs 10 crore.
Times of India