The enactment of long awaited Goods and Services Tax (GST) will remove multiple tax system, reducing input cost for all realty players and thus increasing the demand in real estate sector, says developers and advisors.
The much awaited Goods and Services Tax (GST) bill get clearance in Rajya Sabha and sent back to Lok Sabha for approval soon. According to experts, this new taxation system in India could bring in more transparency in the real estate transactions and possibly reduce cost of home ownership.
Happykeys prepares a quick draft of the proposed bill and talks about how it is going to affect the real estate state sector:
The bill chiefly entails that:
- GST is a uniform indirect tax system that is levied on goods and services across a country.
- GST will remove multiple tax system like Value Added Tax (VAT), Service Tax, and Additional Duties of Excise & Customs etc. with a single taxation system.
- GST would also replace state taxes like Central Sales Tax, Entertainment tax, Purchase Tax, Entry Tax, Taxes of Advertisements etc.
GST and Real Estate
Real estate experts believe that GST will push demand in the real estate sector and help in pulling up the sector which is reeling under slowdown for some time now. While the new tax system will not affect ready-to-move-in houses as home buyers pay stamp duty to the state government, may be lower costs for under-construction projects and the service tax is calculated on paid duty only.
However, the final benefit to homebuyers will depend on the rate fixed by the government. According to experts, if the rate is lower than the 15% service tax, it will transform into good news for end users.
Here is what the industry experts have to say:
Deepak Kapoor, President CREDAI Western U.P
“The implementation of GST Bill will aid in broadening the coverage of tax base, infusing transparency and also removing the present unhealthy competition among different states. Once GST is implemented, the multiplicity of taxes which leads to ambiguity would be eliminated. We are optimistic that new GST rates if kept rational would bring down the property prices due to lower input costs and as a result demand is expected to grow in near future. However, exclusion of Stamp Duty charges from the GST is a setback as home buyers will have to pay stamp duty too other than GST. Still, the benefit may go to home buyers if lower rate of GST is levied. Also it is very important that GST be implemented at the same rate in all the states to bring in uniformity.”
Zafar Akbar, Chairperson, Exalter Group
“Real Estate sector will be highly benefited with the passage of GST bill as it will be a solution to a sector full of complexes and concerns. The different indirect taxes would be amalgamated into one tax easing the process of taxation considerably both for developers as well as home buyers. It is anticipated that under the GST system, there would be an even flow of credit and current restrictions on construction related credits are expected to be removed as well. Commercial properties are going to get huge benefits with this move as no credit is available on construction of developing a commercial property.”
Sushant Mutreja, Chairman, Cosmic Group, India
“GST bill once implemented would boost transparency and standardization in real estate sector. Home buyers are supposed to pay service tax and VAT presently while purchasing properties. There are also taxes like excise duty, custom duty etc to be paid by the developer which is then added to the cost of properties. The proposed GST will replace these taxes with a single tax bringing down the cost of construction i.e. all the multiple taxes on procurement side would be replaced by GST. However, the actual impact of GST can only be seen when final rates are decided.“
Gaurav Gupta, General Secretary CREDAI Raj Nagar Extension
“GST bill is proposed to put together all these indirect taxes and replace them with a single tax. This would further reduce the costs in the hand of developers and home buyers as well. The burden on tax payers is expected to come down considerably. On the other hand, the bill will also remove the present unhealthy competition among different states which has led to different practices being followed by developers in each state. Hence such practices and tax paid by home buyers will also become uniform under GST regime.“
Prashant Tiwari, Chairman, Prateek Group
“GST bill will definitely be a game changer for Real Estate Sector. GST Bill will follow a single tax regime eliminating all the other taxes reducing the overall cost of construction. Under GST bill various taxes on building materials would be merged into one giving direct benefit to the builders which would then be passed on to the end-buyers. Also, it will have a positive effect on the commercial properties as commercial real estate is facing a lot of heat due to lack of funds. GST could boost this property segment as well. We are expecting that GST would help in increasing the GDP growth which would eventually help real estate to flourish in long-term.“