New Construction Services Tax to Increase Real Estate Prices

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Mar. 9 – A proposal to implement a construction tax under the new services tax will invariably hike prices for real estate projects still under construction or pending approval from authorities.

The tax would apply to the construction of complex service or commercial or industrial construction services as well as services offering premium prices based on a flat’s location in a multi-storey building.

“The proposal is to tax construction if the entire payment for the flat is made before completion of construction,” consulting firm RSM Astute executive director K.H. Viswanathan told The Economic Times. “This would increase the cost of the apartment and may discourage potential buyers.”

If the service tax is approved it would amount to 10 percent on 33 percent of the apartment price. There are also proposals to give real estate projects 5 years  to be completed instead of 4 years for claiming deduction of profits.