Service tax to push up prices of flats
- From June 16, 10.2% service tax on contruction of residential
- It means, you have to pay Rs. 60,000 more for a Rs. 20
– Lakh flat.
- Additional 10.2% tax on club membership.
It’s time to pay service tax on house
construction. From June 16, the 10.2% service tax proposed
in this year’s budget will come into force on house
construction and eight other new services.
The rules notified on Tuesday imply that
there will be a tax of Rs. 60,000 on a flat costing Rs.20
lakh in a housing complex.
It could be a double whammy for housing complexes.
This is because there is also a 10.2% service tax on membership
of club or associations. Residents’ Welfare Associations
(RWAs) and co-operative Groups Housing Societies (CGHS) will
have to pay the tax.
Applying layman logic, the tax on house construction
services will jack up the cost of the Rs 20- lakh flat to
Rs 20.6 lakh. Not necessarily, maintained revenue officials
on Tuesday, pointing out that the final cost of a house depends
on a host of factors, including the supply and demand and
competition in the property market.
The rules giving effect to the service tax
proposals of the budget allow 67% abatement in calculating
the tax on construction of houses on the line of commercial
construction services, which were already being taxed.