rakesh

Is Realty sector really smiles?
Have a look….. What property pundit says, about the service tax on rented properties

Already reeling under heavy rentals, office and mall space has just got dearer by 15-20%. And your home by a further 20%. Terming the budgetary provisions, if any, for the real estate sector as bordering on the ‘ridiculous’, property pundits feel that the extension of service tax by the Union Budget 2007-08 to renting of immovable property for use in commerce or business is bound to be passed on to the tenant. The tax, however, excludes residential properties, vacant land used for agriculture and similar purposes, land for sports, entertainment and parking purposes and immovable property for educational or religious purposes.

Adding to the burden will be a further 2% service tax on construction. The tax has been levied on services involved in execution of a works contract with an optional composition scheme under which tax will be levied at 2% of the total value of the works contract.

Says Niranjan Hiranandani, managing director, Hiranandani Constructions, “the finance minister has blundered by imposing a service tax of 12.5% on commercial and office spaces. This will prove disastrous as now the prices of commercial properties will increase by about 15-20%.

Meanwhile, no benefit has been given to urban housing. Further, service tax has been imposed on societies undertaking repair work beyond Rs 3,000. This is ridiculous."

Adds G P Savlani, resident director, Confederation of Real Estate Developers Associations of India (CREDAI), "the imposition of service tax on renting properties for commercial and retail use has not gone down well with the industry.

Instead of announcing any sops for the real estate sector, the finance minister has impacted it adversely by levying a further 12.5% service tax on it.......

What do you think about to increase the service tax on commercial properties…