New Delhi, July 19, 2017: Goods and Services tax is going to be implemented from the 1st of July. GST is being considered as one of India’s most revolutionary tax-related reforms. GST will eliminate conflicting and cascading taxation structures like VAT and service charges in real estate. GST law will increase the margin in the hands of developer by eliminating the above-mentioned taxes.
The real estate property which is under construction for sale purposes will attract a GST at 12%, which is being perceived to be tax neutral. It is classified as a service through works contract hence under construction real estate comes under the ambit of GST, it has also been clarified that input tax credit will be available for developers to take advantage of, which developers can also pass on to their customers under the anti-profiteering clause mentioned in the GST.
Ravish Kapoor, Director of Elan Group said,”GST will be beneficial to the real estate sector by removing the double and triple taxation. In the long run, it will bring homogeneity and standardization into the real estate sector. It will rescue end consumers from the hassle of paying various state taxes at different levels. Apart from the significant reduction in tax management expenses due to a single unified tax, the compliance costs will also go down. However, on the other hand, the service charge levied on the purchase of the property is likely to push costs up a bit.”
Affordable housing is exempted from service tax though the government in future may come out with clauses for affordable housing or may plan on continuing the exemption of affordable housing under the GST.
Ssumit Berry, Managing Director of BDI Group said that GST will remove multiple layers of taxation, and would thus save consumers from the hassle of paying taxes at various levels. It would also result in reduction of tax management costs. On the other hand, the service charge levied on the purchase of the property is likely to push costs up a bit since services will be taxed at the rate of 18%.
Holistically, GST is appearing to be a benefactor for the real estate regime, various reports have mentioned that it will provide a boost to the real estate sector, and combined with RERA make the sector transparent and beneficial both for the buyers and developers.
