Air travel, under construction houses to cost more from today

The Finance Bill 2010 seeks to bring more services under the ambit of service tax
TRAVELLING by air and purchase of houses that are under construction will get costlier from Thursday as they are going to come under the ambit of modified service tax from July 1, 2010, as announced in the Finance Bill 2010. As per the circular issued by the Ministry of Finance, all domestic air travel ticket would be levied a service tax of 10.3 per cent on the gross value
of the ticket or Rs 103, whichever is lower on a economy class ticket, while on a international travel air ticket a service tax of 10.3 per cent on the gross value of the ticket or Rs 515, whichever is less, will be levied. The service tax is only applicable on journeys originating in India. But it will not be levied for those taking a flight from or to airports in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Bagdogra in West Ben
gal, Jammu and Kashmir and Leh. Similarly as per the provisions of the Finance Bill, all sales of under construction houses from July 1, 2010 will attract service tax of 10.3 per cent. There is a silver lining though.
According to tax expert, Pawan Gupta, as per the circular only 33 per cent of the base price of the flat will be chargeable to service tax levied at the rate of 10.3 per cent, which means that taking the effective tax to 3.3 per cent. This effectively means, if you are buying a house under construc
tion for say Rs 50 lakhs, you will have to shell out service tax to the tune of Rs 1,65,000 on the purchase. Low-cost housing under the Jawaharlal Nehru National Urban Renewal Mission and the Rajiv Awas Yojana has been exempted from service tax. In the days to come the Government is also looking at bringing more services under the ambit of service tax. For example electricity distributed by companies to our homes, and rail freight services are all likely to attract service tax in the future. 

SOURCE: Expressbuzz