THE Mumbai High Court has granted an interim stay on a petition filed by the Maharashtra Chamber of Housing Industry (MHCI) challenging the levy of service tax on buildings under construction.
The petition was filed challenging the constitutional validity of the Finance Act 2010,which sought to introduce service tax on residential projects under construction,or where a completed building has not received its occupation certificate as on 1 July 2010.M a n y builders and developers said that the cost of ownership would rise considering that the service tax was being charged at the rate of 2.5%.The sale of apartments have been termed equivalent to service and the government is trying to interpret it as service, said Sunil Mantri,chairman of the Sunil Mantri Group.
Mr Mayur Shah,CMD of the Mumbaibased Marathon Realty,said that the service tax was not warranted as the National Housing policy had suggested taxation on home purchases should only be around 2% to 3% of the total cost,and that multiple layers of taxation would drive away buyers.
The move to grant an interim stay is a welcome one as developers had only two options either to pass on the service tax to the final buyer or cut the base rate of the apartment or flat, said Vikas Agarwal,senior vice-president and co-head of corporate sector rating at rating agency ICRA.
The next hearings on this issue is slated for August 3,2010.
Comment : Hope this flawed legislation will be thrownout by Courts. When ye buy a house, its an out right purchase and sale transaction. There can not be service tax on a sale transaction. The Builders in AP too need to move HC. Keyword Tags Hyderabad News,Service Tax, Service Tax on Construction
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