Realty stocks surge on service tax review

Stocks of real estate developers surged on the bourses on Monday as the Central Board of Excise and Customs (CBEC) is set to re-examine the matter of service tax levied on realty developers.

The government's move to impose service tax on builders was strongly challenged with a slew of writs filed by real estate developers in various high courts.

The dispute is whether the builder per se is a service provider. The CBEC is slated to discuss the issue at a meeting later this week.

The builders contend that they are not liable to pay tax merely because they have got rights develop the property. CBEC's September 2004 notification had said that estate builders, which construct the property for their own use, rent it out or sell it were not taxable service providers.

But if such real estate owners hire a contractor, the payment made to them would attract service tax.

Stocks of real estate developers were up following the CBEC's decision to re-examine the tax issue. Mahindra Gesco was up by 8 per cent at Rs 688.20.

Ansal Housing and Ansal Properties gained 5 per cent each to close at Rs 360.70 and Rs 951 respectively. Morarjee Realties ended the day with a 5 per cent gain to close at Rs 835.25. Unitech posted a gain of 5 per cent at Rs 4736.30.