Some more time to the implementation of GST and it’s already making the rounds on the internet. With the GST Bill being passed in the Lok Sabha on March 29, 2017, it seems definite that it will meet its July 1, 2017 deadline for execution.
The real estate sector is one of the most pivotal sectors of the Indian economy and deserves special attention when talking in terms of economy. Goods & Service Tax (GST) may bring a lot of relief to the real estate sector. The supply chain mechanism in real estate sector will be revamped after its complete implementation and it will be great to watch the effect that it has on the complete sector of real estate.
GST for the real estate sector-
GST once implemented will bring a lot of transparency in the real estate sector and minimize unprincipled transactions. Under the current tax laws, VAT and Service tax are charged by a number of contractors and excise duty, entry tax, octroi is paid on the procurements. But, the GST law will increase the edge in the hands of the contractor/developer by removing all the taxes mentioned above.
The GST is being advertized as the game changer since it is the one bill that would replace several taxes, cesses and surcharges at one go. The realty market is expecting to benefit from the rollout in a major way. Once implemented and followed, the real estate sector will come under the GST domain within one year of its roll-out.
The important question though still persists – Will homes cost more for homebuyers post GST implementation?
The current description of the GST bill states that the leasing of a building, in parts or as a whole – including residential and commercial building, would be considered service rendered as part of the bill. While currently the service tax is only levied on the commercial and industrial units which have been rented out and the residential unit is exempted from such taxes. Now, the service tax and VAT will be replaced by the Central GST and State GST, while the stamp duty will remain unchanged as it is out of the marks of GST. Therefore, the only two aspects that will define the impact of GST on the sector are – the rate and abatement for land value in total agreement value of residential and under- construction homes. On an overall level, with the implementation of the GST in July, the homebuyers may need to bear vaguely higher taxes but they could still pay lower prices for the property if the builders pass the profit of input credits, to their customers.
The takeaway –
These five points mentioned below summarize the total impact that the goods and Service Tax Bill (GST) will have on the real estate sector:
- Under-construction homes would attract GST.
- Leasing and renting of land and building would also invite GST.
- GST to be levied on EMI of any under-construction property.
- Tenancy and leasing would be considered as rendering the service under the GST bill.
- Real estate to come under the GST ambit within one year of roll-out, which means stamp duties will continue to be charged until then.