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Business & Economy
Government will rein
in real estate sector
What is India News Service,
Thursday, 10 February 2005, 1700 hrs IST
Clearly concerned over the large incidence of tax evasion in the real estate sector, the government is considering
rationalising the existing regime by removing the \93distortions\94 and replacing it with a \93fair and incentivised system.\94
\93The present distortionary tax governing the real estate industry in India encourages the industry to remain outside the organised sector. This, in turn, has led to a situation where the real estate sector has become a major breeding ground for tax evasion and criminal activities,\94 sources said.
Sources said that rationalising the present tax regime would result in large revenue and economic benefits besides expanding the tax base significantly. \93This sector must form part of the tax base for any value added tax (Vat),\94 the sources said.
Presently, a multiple taxation regime, both at the Central and the state level, govern the real estate sector. Sources said that presently most inputs used in the real estate industry are liable to Cenvat, which is not matched by corresponding benefit for input credit. This is because the output is exempt from Cenvat or service tax.
\93This is a major anomaly which many in the real estate sector have taken undue advantage of. It has also resulted in a flourishing invoice trading industry encouraging fraudulent claims of input credit,\94 sources said.
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