The Budget proposals have thrown up a dampener for the housing industry. Construction services have now been brought under the ambit of the service tax in an unexpected move that would raise cost of apartments that are still under construction.

The finance ministry has suggested that construction would be deemed to be a taxable service if the building or complex is still under construction and approval from the concerned regulatory authority - which in most cases is the resident municipal authority - hasn’t yet been granted. The levy would cover all construction of complex service or commercial or industrial construction services, the Finance Bill suggested.

The service tax levy would be 10.3% and would also apply to additional services such as those offering preferential locations for flats in multi-storey buildings where flats in each floor are priced at a premium due to their location.

The Economic Times