The Confederation of Real Estate Developers' Associations of India (CREDAI) has said the Service Tax abatement announced by the Finance Minister, Mr Pranab Mukherjee, would bring down the levy on apartments to 2.5 per cent from earlier proposed 3.3 per cent. Mr Kumar Gera, Chairman, CREDAI, said increasing the abatement from 67 per cent to 75 per cent would mean that the service tax charged on the cost of apartments would go down to about 2.5 per cent from the earlier proposed 3.3 per cent. However, he felt that the method of calculation was unjust as land, the biggest component in the cost of a residential unit, should not be taxed as a service. Mr Gera said in the present proposal, the abatement given (where cost of land is included in the price of the apartment) was unjust. The process would lead to complications and pose difficulties for buyers in understanding what they are being taxed for. The applicability of Service Tax on projects under construction was also a matter that needed clarity. Home buyers as well as developers were not sure if they would be taxed fully or partially for bookings already made on under construction projects, he said. The practicality of implementing this tax would face hurdles as the provisions and methodology for issuance of completion certificates for projects varied across states. Mr Gera said, “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 GST is brought into effect.”
