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Updated: March 4, 2010 19:05 IST

No rollback of service tax on realty: Finance Ministry

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No rollback of service tax on real estate developers at the time of construction will lead to a rise in housing and commercial property prices. Photo: S. Ramesh Kurup
The Hindu No rollback of service tax on real estate developers at the time of construction will lead to a rise in housing and commercial property prices. Photo: S. Ramesh Kurup

The Finance Ministry on Thursday ruled out rolling back of service tax on real estate developers at the time of construction, a move which the industry says will lead to a rise in housing and commercial property prices.

“Construction is a service. As a service, there is no reason why it should not be taxed,” Revenue Secretary Sunil Mitra said at a CII seminar here on Thursday, adding however, it is only 3 or 3.5 per cent that gets added up for the buyer.

Central Board of Excise and Customs chairman V. Sridhar has also said the realty sector would not attract 10 per cent service tax in effect. “The tax is not at full 10 per cent ad valorem. We’ve a scheme of abatement for 67 per cent. The ratio, basically, was arrived at to represent the cost of inputs. So, in reality, it would pay only 33.3 per cent of the value,” Mr. Sridhar said.

In the Budget speech, Finance Minister Pranab Mukherjee had said development of real estate complexes will attract service tax, unless the entire consideration for the property is paid after completion of construction.

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