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Ministry joins service tax debate
March, 06th 2010

The budget has proposed a service tax on housing to curb speculation, but it seems the move doesnt have the support of even the housing ministry, which is seeking amendments.

The union housing ministry has recommended certain modifications on the imposition of service tax on housing announced in the recent budget.

NDTV learnt from sources in Nirman Bhawan that the modifications have been suggested as the minister incharge, Kumari Selja, is of the view that attempts to curb speculation should not make housing unaffordable for the aam aadmi.

According to the modifications being suggested, the government should exempt first-time homebuyers from the proposed tax and should also keep houses priced at less than Rs 20 lakh from outside the ambit of this tax.

Sources said that the housing ministry would take up this matter with the finance ministry sometime next week.

Meanwhile, real estate companies are not very hopeful of a relief and are getting ready to live with the new tax.

Rohtas Goel, CMD of Omaxe and president of Naredco, said, In effect, the impact comes to about 3 per cent and we will hopefully be able to cope up with it.

Service tax on housing units came into effect, despite the sector lobbying very hard for the waiver of another service tax on rental income, that was imposed in 2008.

The sector's argument is that real estate is not a service and that its a product and as such, it should be kept out of the service tax radar. Amidst all this, no one really knows if Pranab Mukherjee would relent.

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