Indian market got acquainted with the Goods and Services Tax or GST on July 1, 2017. The unified tax regime has subsumed all existing indirect taxes into a single tax. However, Real Estate is a sector which will yet to be entirely brought under the new taxation regime. Experts believe that inclusion of real estate into GST ambit might prove to be a game changer for the sector. GST will absorb multiple indirect taxes into one single payable and thereby it will reduce the construction cost significantly.
Homebuyers are likely to be benefited with the better transparency as there will be a single tax to be paid on the real estate purchase. Let’s have a look at the GST impact on various aspects of home buying-
Luxury properties to be more expensive– The raw materials those are used at large in the development of luxury housing projects such as- glass, aluminium, monuments stones, ceramic fittings and lamps etc. will fall under 18-28% GST slab which is higher than the previous tax slabs. A higher tax rate will escalate the cost of the construction.
GST on under construction projects– The effective GST rate on under construction properties is 12%, but along with the stamp duty and the registration charges, it will be something around 17%.
No GST has been levied on ready-to-move projects which means investing in these projects won’t fetch you any tax benefits under the new taxation regime.
Impact on raw materials– The revised tax regime has brought a significant change in the pricing of the building materials. Developers can claim input tax benefits on the purchased raw materials now. While some of the construction materials will cost higher, there are certain materials which will cost lesser now. Here’s a comparative tax rate chart with respect to the major construction materials pricing-
|Construction material||Pre-GST tax rate||GST rate|
|Paints and varnishes||26%||28%|
|Sand lime and fly-ash bricks||6%||5%|
|Pillars and iron rods||20%||18%|
|Putty and wall fittings||26%||28%|
“Potential homebuyers should know these facts about GST so that they can have the maximum tax benefits while purchasing their dream homes. Developers are asked to pass on the input tax benefits to the end-users by the GST Council which will be very much favourable from the buyers’ standpoint,”- said Mahesh Somani, Chairman- National RERA Committee, National Association of Realtors India (NAR-INDIA).
–LNN (Liyans News Network) – Buy/Sell/Rent properties across 100+ cities in India. If you are willing to buy flats in Kolkata, choose your favourite project from an extensive 72,000+ projects available. Invest now to avail 8-12% GST benefit.