With GST coming into effect from July a lot of changes are expected in Indian real estate market space. Let’s try and decode GST for the common men and the developers and see how things will take shape post July, 2017.
First thing first
Goods and services tax (GST) may bring some good news for the Indian homebuyers. If estimated roughly, the fall in the price of a 1-crore property can be in the range of 3 to 5 lakhs, owing to the consolidation of tax structure which would probably bring down the material procurement and construction costs of properties.
Taxes a homebuyer pays
Followings are the different taxes one pays when he books an under construction property
What difference GST will bring
Service Tax and VAT will be replaced by Central GST and State GST. The discrepancies at state level are expected to go under the GST regime and the homebuyers across India would be paying taxes at a uniform rate. Till now the most disturbing part for a common man has been the lack of clarity; for example, VAT, it might take a professional CA to understand what amount is paid at which level. A layman just has to rely on his sale agreement and go by the directions showed by the developer.
This is where GST can bring that much-needed relief for the common men as now there will be a clear uniform rate for one tax which includes everything that they need to pay to authorities. The entire process will become convenient for the buyers.
Another direct benefit that may become true is as GST is expected to bring down the project cost for developers; which in turn may result into cheaper homes.
Once GST rolls in apartment owners who pay maintenance charge above Rs 5,000 will have to pay about 2.5% additional tax as the existing rate of 15.55% on maintenance charges will now be 18%.
What will GST mean for the developers
Developers pay multiple taxes and duties such as customs duty, central Sales Tax, excise duty, entry tax, etc. which eventually make the properties they are selling, costlier. As GST proposes to combine multiple taxes into one, the cost of construction will reduce. This will enable the developers to sale their properties at a lesser cost which will boost sale and improve liquidity.
With the RERA also under implementation, there are hopes that Indian real estate industry will streamline its processes and going forward India will have an improved image of an investment destination. The legitimacy and simpler operation will attract more foreign investors.
Change is on its way
Be it a homebuyer or an investor, GST will liberate the customers from the hassles of paying taxes at different levels and owning to better transparency and monitoring, real estate industry will make ways for more informed decision.
However, a part of the industry is worried that the final ticket size of homes will increase post GST implementation. Most of them however are waiting for further clarity. In the current market space staying pro-customer is a good stand for the developers; hence it’s expected that the developers with the help of RERA and GST will bring in more customer-friendly changes in the industry.Authored by 9amstories.com Editorial
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