The central government which is contemplating bringing a negative list of services including that in the construction industry is biased towards the rich, feel experts.
As per the proposed changes, if a single dwelling unit is constructed for residence purposes, it will be exempted from service tax. In Mumbai it is generally a highly affluent person who can construct a single dwelling unit (a bungalow). This means that if a rich person constructs a bungalow, he will be exempted from the service tax. However, if a builder constructs a building consisting of many residential flats then he will have to cough out service tax of around 2.5%. This amount is passed on to consumers, who end up paying more for the flat.
The draft has been put online for public opinion since last month and will be closed on December 15.
Under the present law, which has been effective since July 2010, there is a list of over 100 particulars on which service tax is levied ranging from 2.5% to 10.3%. The list also relates to the construction industry, whereby any builder making more than 12 dwelling units is required to pay the service tax.
The builder lobby is already fighting a case in the Bombay High court, arguing that the selling of the property is not a service. Advocate Vinod Sampat, an expert in real estate says, “Though the government has come up with the new proposal, there is no cap on the capital limit of the property purchaser. Certain strata of purchaser may end up benefiting from it”.
“This is discriminatory and does not adopt the principal of the uniformity of the law to all the citizens,” says D Mahadik, a property expert.
