Local authorities in some states do not issue completion certificates while others take many years to issue one. The budget for 2010-11 has proposed Service tax if payment is made before the completion of construction. If Home buyers and property developers cannot procure a completion certificate from the local authority they need not worry about being levied a service tax. The government could allow some independent authority to certify that the property is complete.
“We are examining the issue and will see if a similar certificate from an outside agency can suffice,” said a finance ministry official.The service tax will be levied only on 33% of the base price of a flat sold at construction stage. Charges such as development fee, parking fee and premium location usually paid at the time of completion of construction will also be included in the base price. The new rule will come into effect when Parliament approves the budget.
Home buyers and property developers need not worry, if they cannot procure a completion certificate.The finance ministry may admit a certificate from an architect or builders association as a sufficient proof of completion. Sale of fully completed houses will be exempt from the tax if a completion certificate from a local authority is provided.
Non-availability of completion certificate can increase the cost of a property as the 3.3% service tax would be significant, taking the tax element to nearly 10% after including the stamp duty.Property developers had a mixed response to the proposal. Rajeev Talwar, managing director of DLF, the country’s largest developer, felt the flexibility could be abused. However, an executive of Delhi-based developer Ansal API appreciated the government’s decision. “If the government takes the decision to outsource the whole process to an accredited agency, it will take the pressure off the realty firms.”
Reference:
The Economic Times
