Hot Property To Turn Hotter

RENTALS of commercial properties will shoot up across the country as letting out space for business purposes will now come under the 12% service tax net. With additional 3% education cess, property owners may have to pay a 12.36% service tax. The use of land and property for agricultural, spiritual, sports, entertainment and parking services has been spared.

Hence, the owner of a commercial property in South Delhi who has let out his property for Rs 20,000 a month would have to fork out Rs 2,475 as service tax every month. Experts in the real estate industry feel that owners would pass on the entire burden to tenants. The situation could be worse in Mumbai where rentals are much higher. “This would mean an additional rental burden on tenants every month,” says Tramell Crow Meghraj president Tanaji Chakravarti. There is also a fear that property prices will move up. “The 12% service tax on rent will become an additional drag on the property market in the near future,” said Hiranandani Developers managing director Niranjan Hiranandani.

Meanwhile, the Budget proposal to withdraw tax exemption under Section 81(1)A to construction companies has pulled down the stock prices of all construction companies by 15-20%. Till now, developers didn’t have to pay taxes on profits made from road projects. It has now been clarified that the benefit extends only to developers and not to subcontractors. Most of the construction companies like HCC, Gammon, Nagarjuna and IVRCL were executing projects for NHAI in the past, which was the developer. Now, they will have to pay taxes on these with retrospective effect.

SOURCES:
Economic Times