Assocham Urges Government to Roll Back Service Tax on Real Estate Developers

Strategic Insights -

The Indian industry body Assocham has made a plea to the government to revoke the proposed service tax on real estate developers during construction, citing concerns that it would increase the tax burden on home buyers and negatively impact the sector's recovery. The government's decision to impose service tax on real estate complexes, unless the entire consideration is paid after construction, has been met with opposition from Assocham. The organization argues that this would lead to a 4% increase in the cost of housing, making it less affordable for consumers.

Key Takeaways:

  • Assocham has requested the government to roll back the service tax on real estate developers during construction to prevent an increase in the tax burden on home buyers.
  • The organization estimates that the imposition of service tax on immovable property would increase the cost of housing by 4%.
  • Assocham believes that this would be contrary to the government's aim of providing affordable housing.
  • The removal of service tax amendments is necessary to prevent the total taxation on the real estate sector from exceeding 30%.
  • Revenue Secretary Sunil Mitra had previously ruled out the rolling back of service tax on real estate developers, stating that construction services should be taxed.
  • Mitra estimated that the service tax added to the buyer would be approximately 3-3.5%.

Statistics:

  • Assocham estimates a 4% increase in the cost of housing due to the imposition of service tax on immovable property.
  • The real estate sector's total taxation would exceed 30% if the service tax amendments are not withdrawn.
  • Revenue Secretary Sunil Mitra estimated the service tax added to the buyer at 3-3.5%.

Sources:

  • Assocham's post-Budget memorandum to the Finance Ministry.
  • Press Trust of India (PTI) Maharashtra, 17 March, 1331.