A senior Finance Ministry official today said that there was no reason to exempt from service tax payments made to builders during the period of construction, a proposal made during the Budget for 2010-11.
The Budget announced on February 26 clarified that realty developers must pay service tax on payments made to them during the period of construction, a move which the developers said would raise home prices and crimp demand.
But Revenue Secretary Sunil Mitra said the proposal would not hike prices by more than 3.5 per cent, an increase that could be afforded by the customers.
“Construction is a service. As a service, there is no reason why it should not be taxed,” Mitra told a business conference.
“It is only 3 percent or 3.5 per cent that gets added up (for the buyer).”
The new rule, which will take effect when Parliament approves the Budget, says service tax would be imposed if payments were made before the completion of construction.
Most realtors charge customers in installments during the construction period, which gives them a steady stream of funds for building and ensures there is no pile-up of unsold houses.
According to Mr. Mitra if construction is service then by his measures if a person books a car and the company manufactures it then also service tax should be levied and by this standard all those production orders received by the manufacturing companies becomes service.
Next budget onwards be ready to face service tax on all orders placed with the manufacturing companies for production of goods .
For example
If X places an order of 5000 pair of shoe with BATA,then production as per order will be brought under the service tax net saying that the manufacturing as per order is a service so pay service tax.
Let me tell you friends CONGRESS will not let u to be alive.
Thanks
Ashok Gosar