Latest Expert Exchange Queries

GST Demo Service software link:
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Popular Search: VAT RATES :: ARTICLES ON INPUT TAX CREDIT IN VAT :: TDS :: Central Excise rule to resale the machines to a new company :: VAT Audit :: empanelment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: cpt :: form 3cd :: list of goods taxed at 4% :: TAX RATES - GOODS TAXABLE @ 4% :: due date for vat payment :: ACCOUNTING STANDARDS :: ACCOUNTING STANDARD :: articles on VAT and GST in India
« Service Tax »
 Why is the successful roll-out of the e-way bill necessary?
 How service tax became revenue lifeline for the Govt
 Three simple tricks to save income tax without investing fresh funds
 Goods and Services Tax (Compensation to States) Amendment Act, 2017.
 Services sector need to brought under Section 72A of the Income-Tax Act
 Simplifying GST: Creating a Grand Simple Tax
 The way ahead for goods and services tax
 Goods & Service Tax (GST): Recent Clarifications
 Tax payers can see status of returns filed on GSTN portal
 Export And Import Of Goods Under GST
 The Finance Resolution And Deposit Insurance Bill, 2017

Service tax will add to the cost
March, 18th 2010

Currently, under the Income Tax Act, 1961 (the Act), an individual can claim a deduction for interest paid on housing loan for a self-occupied housing property for up to Rs 1.5 lakh in a financial year subject to the fulfilment of certain conditions. Furthermore, a deduction may also be claimed up to Rs 1 lakh for repayment of principal amount of the housing loan.

There were expectations that the above limits may be enhanced to provide some relief to the common tax payer. No additional concessions have been provided to the individual tax payers on this front in the Budget. Some relief though has been provided to the undertakings engaged in building housing projects in respect of extension of time period for completion of such projects and relaxation in norms for built-up areas for shops and other commercial establishments.

Its, however, important to note that certain proposals on the indirect tax front could adversely impact the cost of the housing projects and thereby, increase the price of residential units. In this context, following points merit attention:

Increase in excise duty

In general, the standard excise duty rate of 8% has been increased to 10% on all goods, including steel, iron, etc. Excise duty on another main input of a housing project, ie cement, has also gone up.

Duty hike in these essential inputs would impact the cost of the construction since in many cases builders may not be able to claim set-off of duty paid on these inputs.

Projects under construction

Besides duty hikes in essential inputs, the government has also proposed to extend service tax to real estate, including residential units. Through this proposal, the government intends to levy service tax on sale of property by builder to buyer if any part of the consideration for the property is received before the completion of construction, ie before the receipt of completion certificate from the competent authority.

In such a situation, the activity of construction would be deemed to be a taxable service provided by the builder/promoter/developer to the prospective buyer, and the service tax would be levied accordingly.

In this context, a question arises from a buyers perspective whether buying a housing unit for which he is making payment in instalments actually involves any service being rendered per se by the builder.

Also, it is not clear whether the proposed levy would impact only new projects or it would even cover the existing projects where booking has already been made by the individuals and part-payments made while construction is at different stages of completion.

If implemented , this proposal could lead to increase in prices of the property by about 3.4% of the sale price, and not 10.3% as is being generally understood, since service tax on such services is payable only on 33% of the value of the property.

Preferential location

Another major setback has been the proposal to levy service tax @10.3% on any preferential location charge or other development charges recovered by the builder except charges in relation to parking spaces.

Most of the housing projects have different cost components like preferential charges for certain apartments due to locational advantage.

These components may now be subject to service tax. This proposal is also likely to push the cost of housing even further.

To sum up

The levy of service tax on housing projects would increase the price of the housing units, if the Budget proposals are accepted in the present form. One should, however, hope that at best the said proposals are made applicable to the new projects and not to the existing projects which are at different stages of completion.

As most of the current housing projects have been delayed beyond any control of the buyer, in the whole bargain, the common man should not be burdened further.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Company Overview

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions