Experts believe that GST, which is relied upon to take off the country on July 1, will bring an impressive measure of straightforwardness and responsibility into the sector and limit questionable transactions.
The section of the four GST bills in the Lok Sabha and the Rajya Sabha, as of late, prepared for the acknowledgement of the greatest tax change Autonomous India has seen.
GST will bring uniform taxation the nation over and furthermore touch all sectors, including the real estate, after it commences on July 1. As GST is an indirect tax, at last, borne by consumers, the primary stress of homebuyers is the manner by which GST will affect them and whether the property will wind up noticeably costlier after its usage.
Developers say that GST will profit the real estate sector by overcoming the present regime of twofold and triple tax collection.
“In the long run, GST will bring homogeneity and standardisation into the real estate sector. It will rescue end consumers from the hassles 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. On the other hand, the service charge levied on the purchase of the property is likely to push costs up a bit. However, whether the home purchase becomes costlier or cheaper will depend on the final applicable tax rate,” Ravish Kapoor, director of Elan Group, said.
Prashant Tripathi, group spokesman of Viridian Group, says GST will benefit both home buyers and developers.
“The removal of multiple layers of taxation with the implementation of GST will prove to be a boon to the real estate sector. Once the policy is implemented, not only would the sector be streamlined, it would also save potential buyers from multiple taxations. The same would be equally beneficial for the real estate
companies, as there would be the significant reduction in tax management expenses due to a single unified tax regime, resulting in a reduction in compliance costs,” Tripathi said.
A few developers say that GST will get an outlook change terms of a solitary tax structure, which will undoubtedly be significantly lesser than the present excise duty, service tax, and between states exacts on the construction goods starting with one state then onto the next and imported products going from the drift and intersection distinctive states.
Industry specialists say that if a homebuyer purchases a property under development, there can be two ramifications. Service tax payable on property under development will be replaced by GST. Currently, there is a reduction in the cost of land for ascertaining service tax on residential properties under development, achieving around 4% service tax.
Whatever be the circumstance, experts share the sentiment that GST will bring an extensive measure of straightforwardness and responsibility into the sector and furthermore constrain questionable transactions.
“As for homebuyers, with uniform tax in place, developers will have free input credits on GST paid for products and services obtained by them, hopefully, which will diminish cost for them and benefits can be passed to consumers. Secondly, when an investor goes to purchase a property, he winds up paying VAT and service tax and the tax rates shift with each state. With GST in place, buyers will pay only a single tax while obtaining property in India, removing any ambiguities. However, GST will enhance the general expense of property under construction for buyers, if the rate is more than the current applicable service tax rate of 15%. If the rate is moderately lower than 15%, GST can bring about price neutral or lower cost for homebuyers,” Atul Banshal, president (finance and accounts) of M3M Group, says.
“First of all, It will manage indirect taxes in the form of VAT, Service tax, Stamp duty, Registration etc more transparently and hence will give confidence to the sector. GST is expected to bring down the total Project Cost and hence shall make the home cheaper and it is a good news for the sector. The Developers had been paying multiple taxes amounting to over 22% approximately so far and hence this shall reduce the Cost of the Project.
With the complexities of multiple taxes gone after GST operational, the buyers would have their confidence going up as, so far, the taxation never exposed overhead Cost to the buyers in the past. It shall be a psychological advantage for the buyers as GST will expose the lack of transparency in the sector. Though farfetched, but higher expected GDP due to GST rolled out and helping Indian economy, may eventually benefit development of Infrastructure and hence the common man, thus tremendously moving real estate sector and making buying property for the common man an easy choice ” says Mr Rahul Singla , Director Mapsko
At present, numerous developers are charging diverse taxes at various rates because of lack of clarity. Customers are liable to VAT and service tax, aside from indirect taxes as excise duty, octroi and entry tax. GST will bring all these charges under one basket and customers won’t be liable to numerous charges. In any case, the effect of GST on the real estate sector can’t be totally evaluated till the time there is lucidity on the rate to be proclaimed.