CREDAI response on Finance Bill 2010
India, 30 April 2010: The Confederation of Real Estate Developers’ Associations of India (CREDAI), the apex body of real estate developers in India, shared its response on the Service Tax issue passed by the Lok Sabha.
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 India, representing pan-India associations of real estate and housing developers. Since its inception in the year 1999, the association has grown manifold with allegiance from 20 state/city level associations viz. Andhra Pradesh, Chhattisgarh, Delhi-NCR, Goa, Gujarat, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh and West Bengal with over 5000 individual member developers encompassing over 60% of the organized private sector real estate development activity in member states/cities in the country. CREDAI has been instrumental in rallying the cause of the Real Estate sector by presenting the issues and concerns of real estate developers to the Government. For more information log on to – www.credai.org