Finance Minister P Chidambaram, on February 28, 2013 reduced the abatement on service tax in India.  This tax is availed by real estate developers for homes and flats above 2,000 sq ft, or for those costing Rs. 1 crore and above.


With the latest development, the luxury homes for the rich will become more expensive and the impact will be clearly seen in places like Mumbai. This will also affect almost every buyer of apartments that are under construction. The city does not offer any decently sized apartment for less than Rs. 1 crore, which is the criteria being used for the tax abatement. The rate of abatement will be used in the calculation of service tax which has to be paid by the developer.

Anuj Puri, from Jones Lang LaSalle India said, “Buyers in tier II and III cities will not be affected much as there are not many projects falling in category and therefore the definition of luxury housing is apt for those cities. However, for metros like Mumbai and Delhi, even the basic housing cost is Rs 1 crore and this proposal will affect almost every buyer here”. The developers are also ready to pass on the impact of higher service taxes to those consumers who will have to pay more to buy these houses.