What is GST and how it will impact Real estate housing in India - Complete details
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| Goods and Service tax |
What is Goods and Service tax (GST) in India ?
Each and every Indian is nowadays is either excited or confused with only two terms First - “GST” and second one - “demonetisation”.We will take this critical term - demonetisation in some other blog post and now here we should focus on the first one i.e. GST.
Many people call it “Gabbar Singh Tax” and many call it “Great Saving Tax” and some call it “Genuine Simple Tax”
So let’s explore what exactly it is and what it isn’t ?
Prior to GST,there were lots of taxes in terms of state tax, VAT, Excise, SwachhBharat, Krishi Kalyan, Central, Sales, Service, levies and what not.However,the Government of India has approved the Goods and Service tax in the lok Sabha on 29th March,2017 with 4 supplementary legislations(Rules) by transforming and merging all taxes into only one tax i.e. GST for betterment of the society :-
- The Central GST Bill,2017
- The Integrated GST Bill,2017
- The GST - Compensation to States - Bill,2017
- The Union Territory GST Bill,2017
The GST comprehends Central excise,service tax,VAT and levies to form a uniform single market in India.India’s Prime Minister Sh. Narender Modi and Finance minister has also assured a super boost of approximately 2% in the GDP as the positive consequence of GST.States will levy Sales tax through State GST or SGST in which VAT will be included.Further the tax payers have to pay just one tax in comparison to many ones and hence the cost and labour work will definitely be reduced.Furthermore,the intent of GST is also to convert non taxpayers to tax payers.
How GST will impact Real Estate Industry i.e. Home buyers,Builders and Brokers ?
Residential construction services will attract GST @ 12% and that will applied to real estate developers which sell residential units/apartments to home buyers before their projects are fully constructed.
For Non Composite VAT States:-
For states like karnataka,Tamil Nadu and Andhra Pradesh that are non composite with VAT,JM Financial report has declared the transaction value as from 10% to 12%.
For Composite VAT states:-
Developers will pay less VAT on total property value but without input tax benefit.Developers will now pass on the VAT and Service Tax which total up to 5-6 % to buyers.
- Transaction costs increase to 12% when input credit is available to services and material
- Transaction costs increase to 6% when no input credit is available by developers
How GST will affect Home buyers ?
- Incidence of Tax - from 5.5% to 12%
- Developers can avail input credit
- President of CREDAI,Mr. Shrikant Paranjpe has addressed that it is not very clear now how the industry will be moulded
Currently affordable housing is exempted from GST,however if it will come,definitely the home buyers will get a surety of cheap homes,as there is till now no clarification on this topic from the government.
In case of premium and luxury segment,the input tax credit limit has been defined as up to 12%.Whereas in the case of ready properties whose occupancy certificates has been received,there will no GST.
Bonus:-
Further,I would like to add one thing more that real estate is a very crucial sector for investing in and one has to get assured from all aspects that he is giving his hard earned money to someone who is reliable,trustworthy and credible.
I highly recommend real estate builders like Tata,Prestige,Sobha,Godrej from India etc. which have a good image and reputation among buyers for value and return and investment.Explore their upcoming and ongoing projects.For e.g. -
Godrej has launched Godrej Mamurdi Pune
Hope that have answered a lot of unanswered queries regarding GST,further if you can value add something please feel free to give your useful insights.
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