Arguing that it will stunt growth of the housing sector, Urban Development Minister Jaipal Reddy has written to Finance Minister Pranab Mukherjee seeking a rollback of service tax in the real estate sector proposed in the Budget. “I wrote to the Finance Minister a couple of days ago requesting him to review imposition of the service tax on real estate,” Reddy told The Indian Express on Friday. In his letter, he has reasoned that the new tax will hit the consumer, which in turn will adversely affect growth of the housing sector. Imposition of service tax means costs for home buyers could increase by 3-4 per cent.

Reddy said he would also be calling on the Finance Minister in the next few days to urge him to withdraw the proposal for service tax. The Union Budget has proposed that the activity of construction is a service provided by the builder or developer to a prospective buyer and therefore service tax would come into play. Roughly, for a Rs 20 lakh flat, a buyer would end up doling out an additional Rs 60,000 to 80,000 on account of service tax.

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