Real Estate Lobby Up in Arms Over Service Tax

March 7, 2007	(Be the first to rate this story!)  Loading ...
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The Confederation of Real Estate Developers’ Association of India (Credai) plans to protest against the proposals laid for real estate sector in the budget unveiled by finance minister, P. Chidambaram. The major gung-ho is done in context of imposing 12.36% service tax on “renting of immovable property for use in commerce or business.

Refuting the finance minister’s move, Credai’s secretary, Raj Menda, said that the finance minister’s service tax proposal is not constitutional as land tax is a state subject. He further added that, since the building is on the land, any kind of tax on the building can only be imposed by the state government. And central government can’t impose any tax.

Menda, who is also the managing director of RMZ Corp, the Bangalore based real estate company, said added that the association will soon submit its demand to revoke service tax to the finance minister.

And if the finance minister does not agree with them and Parliament passes the Budget with service tax on lease rentals in place, then they will knock Supreme Court’ door.

According to him, as a result of the new service tax, some of his IT customers will have to pay Rs 60 lakh more per month on 2 lakh sq ft of rented place.

Menda is not alone in this crusade. Harshvardhan Neotia, chairman of Ambuja Realty Development, too feels the new service tax is a burden on the IT promoters and will increases their overhead cost, which is a concern.

Menda said Credai has already spoken to some senior advocates on the possibility of moving court on this issue.

However, Narayan Jain, a senior tax consultant, feels that real estate entrepreneurs are misinterpreting the proposed amendment as service tax is not going to be imposed on the amount of rent but only on the brokerage or commission payable in respect of services rendered by the real estate agents or the brokers.

News Published Under:   Real Estate Developers |

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