Real estate developers have called an emergency meeting to assess the impact of the service tax on housing and will approach the government for rollback of the Budget proposal.
"We will call a meeting of the association to discuss the Budget proposals, particularly the levying of service tax on housing which will have a negative impact on the realty sector," industry body National Real Estate Development Council president Rohtas Goel said.
Goel, who is also the chairman and managing director of realty firm Omaxe, said the dates for meeting has not been decided yet.
The meeting is likely to be attended by a number of leading developers, including realty firms DLF and Unitech.
In the Finance Bill 2010-11, the government proposed that construction of real estate complexes will attract service tax, unless the entire consideration for the property is paid after the completion of construction.
While some developers are of the view that the service tax of 10.3 per cent would be imposed on 33 per cent of the total sales value, others feel it should be imposed on 33 per cent of the total construction cost.
"We will demand rollback of this proposal, otherwise it will have detrimental impact on the housing sector," NAREDCO senior vice president Sanjeev Srivastava said.
"Affordable housing will become non-affordable and black money would come into play due to this proposal," an official with leading realty firm said.
"This is a clear case of mis-representation. The developer sells a flat/commercial building to the prospective buyer. On this sale, registration charges are paid to the state government. There is no service involved," he noted.
This aspect has been clarified by the Guwahati high court in Magus Construction case wherein the Honble court held that as the land belonged to the builder, the transaction with the purchaser of flat was purely a transaction of sale and no service was involved, the official said.
Another realtor's body Confederation of Real Estate Developers' Associations of India had said that applicability of service tax to all under-construction flats and homes being booked prior to completion will increase the end cost and will significantly impact affordability of the home buyer.