Confusion on Service Tax (ST) levy on construction: Although the aim is to discourage speculation and encourage the sale of ready flats, developers see this as pushing up prices 3-4%. Other ST provisions rolled out in property: 1) “Activity of renting itself is a taxable service”, levies a 10% ST on it (circumvents Delhi HC ruling in Apr09); 2) ST levied on rent of vacant land leased for business/commercial; 3) premium services like higher floors, preferential views to be subject to ST. Implications for sector? 1) ST being passed on to tenants/customers will be dependent on demand-supply, 2) higher impact of ST seen on affordable housing (could impact volumes)
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