Construction industry for service tax exemption

After truck owners it is the turn of the construction industry. The industry has asked the Centre to remove the 10 per cent service tax imposed in the Union Budget.

Industry sources claim that construction of buildings does not come under the service definition.

It is production business and as such does not attract the service tax.

Mukeshbhai Seth, chairman of Rajkot Builders Association said that the industry has made representations to the Union finance minister and to the chairman of the central board of excise and customs.

"Sixteen real estate associations from all over the country have unanimously demanded to the finance minister to exempt construction industry, and particularly the construction of commercial complex building from service tax net," Seth said.

"With the steep rise in prices of cement and steel, the real estate developers are already passing through a critical period.

"Service tax will be an additional burden. The finance minister has promised to look into our demand," Seth added.

This construction industry in the state, with an annual turnover of Rs 10,000 crore, pays 45 per cent of its turnover tax to the government.

"How will one book profit if a builder has to pay 22 per cent as excise duty on material such as cement and steel, 12 per cent in the form of sales tax, 3 per cent octroi duty and further 35 per cent as income-tax?" Bharat Patel, a builder.

"In the construction of one- square feet of building, 25 kg of iron and steel is utilised. During the last three months the price of steel has increased substantially," the anguish Patel said.

The developers of Gujarat will be hit hard by the service tax, Patel said. This is because the state imposes a 9.9 per cent stamp duty on land and construction.

"We also have asked the state government to reduce the stamp duty to 4 per cent," Patel said.

The imposition of service tax will jack up the real estate prices by 10 per cent, the industry sources said.