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Reddy urges Mukherjee to re-look service tax
April, 16th 2010

Union urban development ministry has urged the finance ministry to take a re-look at the service tax imposed on housing complexes under construction as it feels that the levy will push housing out of the common man's reach and hurt the real estate sector, which is yet to recover from the global economic slowdown.

Urban development minister S Jaipal Reddy, who met finance minister Pranab Mukherjee on Thursday, is believed to have argued for keeping real estate out of the service tax net as it may shoot up housing prices hitting the common man badly.

Sources said the UD minister told the FM that the real estate sector in the country is yet to to come out of the impact of global recession and this is not the right time to burden it with another tax.

Realty players and many industry chambers have been urging the government to withdraw the service tax imposed on the housing sector (at 3.3%, with abatement), as it would discourage home buyers.

It would also hit the sector which is recuperating from the impact of economic slowdown.

"The urban development ministry feels the proposal of service tax made in the Budget needs review. I am recommending the review of the proposal by the finance ministry," UD minister had said in past at an industry chamber's meet.

Mukherjee had in Budget 2010-11 brought development of real estate complexes under the ambit of service tax from April 1, 2010 unless the entire consideration for the property is paid after completion of construction.

"In the construction of complex services, it is being provided that unless the entire consideration for the property is paid after the completion of construction (i.e. after receipt of completion certificate from the competent authority), the activity of construction would be deemed to be a taxable service," the Budget proposal said.

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