No rollback of service tax on realty, says finance ministry official

The finance ministry today said that there will be no rolling back of service tax on real estate developers at the time of construction, a move according to analysts, will end up in higher prices for housing and commercial property .

''Construction is a service. As a service, there is no reason why it should not be taxed," revenue secretary Sunil Mitra said at a CII seminar in New Delhi today.

''It is only 3 or 3.5 per cent that gets added up for the buyer'', he added.

In his Budget speech, Finance Minister Pranab Mukherjee had said development of real estate complexes will attract service tax, unless the entire consideration for the property is paid after completion of construction.

"In the construction of complex services, it is being provided that unless the entire consideration for the property is paid after the completion of construction (i.e. after receipt of completion certificate from the competent authority), the activity of construction would be deemed to be a taxable service," say the Budget papers.

Central Board of Excise and Customs chairman V Sridhar has also said the realty sector would not attract 10 per cent service tax in effect.