The imposition of a service tax on the buying of under-construction property will likely result in an additional cost of up to 3.3%, which we believe will be passed on to the buyer.
Budget documents indicate that government intends to recognize construction activity as a service provided by the developer to the buyer. We believe the imposition of service tax will be debated extensively and full clarity on the proposal will likely emerge in a couple of months.
The service tax is applicable for (1) construction of complex service under sub clause (zzzh) and (2) construction of ‘commercial or industrial construction service under sub clause (zzq). ‘Construction of complex’ means construction of a new residential complex (with more than 12 units) or completion and finishing services in relation to a residential complex.
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