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- Realty lobby to move court on rent tax plan
Interesting! I'm on FM's side......
CREDAI team to appeal to finance minister to withdraw the service tax. Confederation of Real Estate Developer's Associations of India (CREDAI), the apex body of organized real estate developers and builders across India, has planned to move court if the budget proposal of service tax net on lease rental income from commercial business is not rolled back by Finance Minister P Chidambaram.
CREDAI has taken legal opinion on the issue and is arguing that any taxation on income from land is a state subject and not under the jurisdiction of the Centre.
"Any tax on land is subject to state jurisdiction and the Centre cannot levy any tax on income, which is accruing from land," CREDAI national secretary Raj Menda said.
A delegation from CREDAI will shortly meet the Finance Minister to request him to withdraw the service tax on rental income from commercial business. In case the Finance Bill gets passed without change in the provision, CREDAI would have no option but to move court to seek redressal, Menda said
In all 18 state level associations spread over 17 states of the country are members of CREDAI.
The budget proposal of inclusion of lease rental income from commercial business in service tax net would have a negative impact for companies in commercial segment although lease rental agreements have provisions for tax increases, Menda said.
The real estate developers are apprehending that in the longer run companies may not be able to pass through these tax increases as the tenant or occupant may refuse to pay service tax at 12.5 per cent of the rent.
In that case the owners may have to absorb the increase leading to lowering of yields significantly. This will drive a typical investor to divert his investment to other asset classes.
Also the domestic real estate venture capital funds that have already put money into income yielding assets will suddenly find the income going down by 12.5%.
The pinch would be felt most by the occupiers of leased commercial office space or retail sector. In the retail segment almost 30 per cent of the total costs were real estate costs.CommentQuote0Flag