After the implementation of Demonetisation and RERA, the transparency and streamlining of the process in Real Estate will be further encouraged with Goods and Service Tax (GST). GST which was implemented on July 1, 2017, is still under controversy, especially from traders section. The main intent of Goods and Service Tax was to dismiss central excise, service tax, VAT and other local taxes, and create a uniform tax market. It is implemented under four-tier tax structure- 5, 12, 18 and 28 per cent slab. Presently, different states have different tax slab for real estate. For instance, in Maharashtra, there is 4.5 per cent for service tax, plus 1 per cent VAT and other taxes and charges.
Unfortunately, the government hasn’t given the clear picture about the stamp duty, which is extremely high for land and apartment.
Presently, homebuyers pay a number of indirect taxes, excluding stamp duty. This has increased the overall rate of the property that certainly creates two thoughts over purchasing of property.
How will Real Estate be Impacted from Goods and Service Tax?
Real estate contributes 5% to India’s GDP and with GST there will be no scope for double taxation. So for home buyers, it will be a big relief in terms of cost. For developers, the cost of development will surely come down. Earlier, developers had to face multiple taxes, including Custom Duty, Central Sales Tax, Excise Duty, etc. This certainly gets passed on to buyers as the price of the property increases. With GST, there will be a great relief for both the parties.
“There are a lot of products developers procure for the construction of their projects on which there is double taxation at present. The cost they bear for these come to 20 to 25 per cent of the cost of materials they are buying. So, with the GST Rate, between 12 and 18 per cent, it will reduce the cost of production for developers. This will be good for buyers, as developers will be able to pass a part of the benefit to them,” says Mr. Ankit Pradhan, Director, BOP.
Though there may be some ups and down in the price of under-construction and ready-to-move flats, the GST will provide more transparency and better control in the system.
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