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Urgent -Want to but a flat- hurry up- From June 16, flats to cost 3% more

By djain128, Section Real Estate
Posted on Wed Jun 08, 2005 at 05:08:08 AM EST

It's time to pay service tax on house construction. From June 16, the 10.2% service tax proposed in this year's Budget will come into force on house construction and eight other new services.
The rules notified on Tuesday imply there will be a tax of Rs 60,000 on a flat costing Rs 20 lakh in a housing complex.

It could be a double whammy for residential complexes as there is also a 10.2% service tax on membership of club or associations.

Residents' welfare associations (RWAs) and cooperative group housing societies (CGHS) will have to pay the tax as they are not in the exempt category of political, religious or charitable associations such as political parties, trade unions or even the Press Club.

According to indiancaonline, this would mean the annual subscription to RWAs or the monthly maintenance charged by many CGHS will bear the burden of the tax, but properties purchased before 16-6-2005 will not attract the levy of tax so those who wany to buy should hurry up.

Applying layman's logic, the tax on house construction services will jack up cost of a Rs 20-lakh flat to Rs 20.6 lakh.
However, revenue officials said on Tuesday, pointing out the final cost of a house depends on a host of factors, including the supply and demand and competition in the property market.

Service tax net to extend to house construction and 8 other areas

You have to pay Rs 60,000 more for a Rs 20-lakh flat

Additional 10.2% tax on club, association membership

This will lead to rise in monthly maintenance charges

`No direct link between tax and property prices'

Wef June 16 and service tax on house construction will be implemented nation-wide. As per this year's budget, a service tax of 10.2% will be levied on house construction and eight other new services. According to realty experts, the new service tax will hike the price of house construction quite a bit. ``There is no one-to-one correlation between the tax and property price. Property prices have reportedly seen 30% increase in the last couple of years. But there was no service tax on construction of houses then,'' argued a tax official.
The rules giving effect to the service tax proposals allow a 67% abatement in calculating tax on construction of residential houses on the line of commercial construction services which were already being taxed.

Source The Times of India dt 8-6-05
http://epaperdaily.timesofindia.com/Daily/skins/TOI/navigator.asp?Daily=CAP

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