In a relief to the realty sector and home buyers, finance minister Pranab Mukherjee on Thursday announced tax concessions to the construction sector, which was brought under the ambit of service tax in this year's budget. With the announcement, service tax would be levied on 25 per cent of the gross sale value of property compared to 33 per cent proposed in the budget in February this year. Replying to the debate on Finance Bill in the Lok Sabha, the finance minister said he proposed to ``provide the tax relief to the construction sector by enhancing their rate of abatement from 67 per cent to 75 per cent of the gross value, where such value includes the value of the land constructed upon," he said replying to the debate on Finance Bill in Lok Sabha.

Santosh Roongta, national president, CREDAI, told Financial Chronicle: "We had demanded that the rate of abatement be enhanced from 67 per cent to 90 per cent. Nevertheless, it is good that the finance minister has raised it to 75 per cent of the gross value where such value includes the value of the land constructed upon. I am sure the end-users will be benefited to a great extent as a result of this. I wish he had raised it to 90 per cent.''

CREDAI NCR president and chairman of Parsvanath Developers Pradeep Jain too welcomed the move saying that service tax exemption for the poor under the Rajiv Gandhi Awas Yojana and the Jawaharlal Nehru Urban Renewal Mission (JNURRM) was a welcome step. On the question of abatement offered, he said the "increase in abatement from 67 per cent to 75 per cent would mean reduction in effective rate from 3.4 per cent to 2.5 percent on the value of property, which is a positive step.''

But Rohtas Goel, chairman cum managing director of Omaxe, told this paper that ``while service tax exemption for the poor is a welcome step, it is not fair to levy any tax whatsoever on construction activities as we pay sales tax and stamp duty charges. Yet, there is going to be some relief.'' Pratik Jain, executive director, indirect tax, KPMG told Financial Chronicle that while ``these measures do provide some relief to the industry though the expectations were clearly higher. It is still not clear as to whether service tax would apply with respect to projects under construction or where part payment has already been made."

Real estate developers as well as urban development minister S Jaipal Reddy had asked the finance minister to review the proposal, saying that the proposal would hit the sector which is recovering from a huge slowdown in demand.