Exemption from service tax on property sales

The real estate industry has some more news to cheer, as the Central Board of Excise and Customs has issued a circular stating that developers do not have to take up registration or pay service tax on property sales.

The clarification is a step in the right direction, said real estate developers. With banks making interest rates more attractive, construction costs coming down with the prices of steel and cement, and prices also becoming attractive, the timing of this circular is just perfect, they said.

“This decision would definitely benefit purchasers, as they were liable to pay 12.5 per cent tax on 33 per cent of the construction cost, which actually translates to 4.1 per cent of the cost of construction,” said Mr A. Balakrishna Hegde, Former President of Confederation of Real Estate Developers’ Associations of India CREDAI, Karnataka.

The clarification has come after the CREDAI representation to the board that some States insisted that real estate developers undergo registration under the Service Tax Act and pay service tax in respect of residential complex having more than 12 units under the “construction of complex” service. Welcoming the decision, Mr Hegde said: “Our stand has been vindicated.”