The Hindu Business Line : `Reconsider service tax on real estate sector'

THE Confederation of Real Estate Developers' Associations of India (CREDAI) has urged the Government to reconsider the levy of service tax on the real estate sector.

The confederation has reiterated that the industry was not a service industry and it should be spared from the imposition of the new tax.

Mr Kumar Gera, President of CREDAI, said just when the real estate industry was looking up due to various measures taken by the Government , particularly in infusing price stability, service tax could affect its growth trend.

He said levy of service tax in the case of the developer was nothing but a tax on profit as with appreciation and value addition of immovable property, it could prove to be a burden to the promoters. "All this had no connection to the primary activity of construction which was now deemed as Construction service under the Budget 04-05," he added.

Normally the service provider extends direct service to his client and is thus able to bill his client precisely the amount of service tax along with his invoice. In the case of real estate developers, their customers are not clients but customers who purchase immovable property.

"A builder is perceived as seller of immovable property. The final transaction between members and their customers are, therefore, not one of providing a service for which an invoice is raised. In such circumstances developers do not have any opportunity at all to raise any bill on their customers for passing of any such burden of service tax," Mr Gera said.

He said that in addition to the heavy taxations duties incidence paid by the real estate industry for the inputs, it also had to incur stamp duty, registration charge and development charges. Thus service tax would impose an additional burden for the business.

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