After the introduction of Negative List regime, ambiguity has arisen regarding exact service tax implications on various charges recovered by developers. Developers and investors are wading in troubled waters due to reduced demand, liquidity crunch and delayed projects, says Sherry Samuel Oommen, founder and senior partner, GyanMagnus Associates.
The rate of minimum alternate tax (MAT) could stand increased from 18.5 per cent to 20 per cent in the new budget. While the enhancement in rate to 20 per cent could be justifiable, imposition of MAT on gross assets would clearly be retrograde, Oommen said.
Greater clarity on the roadmap for implementation of Goods and Services Tax would be critical for the sector, he said. Section 35AD of the Income-tax Act, 1961 provides a 100 per cent deduction of capital expenditure in the first year of business set up for certain specified businesses, which includes affordable housing.
Currently this deduction does not benefit developers, since business of developing housing project does not involve capital expenditure. This is so because construction and land are stock in trade and not a capital asset. Thus, relooking at the incentive for affordable housing becomes critical.
On a different plane, cascading effect of stamp duty has been a major reason for non-registration of deals and for alternate conveyance options.
Introduction of uniform stamp duty rates and stamp duty credit will reduce costs for ultimate buyers and foster transparent deals. It would be indeed welcome if the State Government could introduce the same in the ensuing State Budget, Oommen said.
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