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Urban Housing Ministry proposes removal of service tax

Urban Housing Ministry proposes removal of service tax as it adds to the consumers cost of buying a house.

Apnaloan.com Research Bureau

20 Feb 2008

The Urban Housing Ministry or the Nirman Bhawan has proposed the removal of service tax on construction of residential properties.

According to the ministry, the 12.5 per cent service tax adds to the buyer's cost and  defeats all efforts to keep check on real estate prices.

If the tax is scrapped, the cost of a house will reduce by 3-4 per cent for the buyer.

Budget 2005 brought construction of residential complexes having more than 12 residential houses or apartments within the purview of service tax net.

Service tax is charged to satellite townships that have more than 12 houses spread horizontally, as well as apartment complexes of more than 12 flats.

It is not charged on the entire amount charged for the residential unit. Instead, the tax is levied on value addition by the developer based on the cost of land and construction materials, thus adding to the cost incurred by the consumer.