Real estate has been brought under 12% tax slab of GST ambit, which holds kind of poker-face impact for the homebuyers according to the market experts. There will be hardly any additional tax disbursement and cost from the GST preface.
Indirect taxes levied on the real estate selling are- excise duty, value added tax (VAT) and service tax totaling 9-11 per cent. Stamp duty is the only tax which varies from state to state. Apart from the stamp duty, all other taxes will be included in GST under the new TAX that will also allow input tax credit for the builders. Realty sector is still unsure about the abatement of the land cost.
The current effective tax rate for realty sector is in the range of 9-11%, barring the stamp duty. The proposed rate of GST shouldn’t exceed 12%, as it would inflate the price of property further & Input credit to realty sector. This should impel the people to come within the tax net and facilitate condensing the cash element in the economy.
It’s being said that that buyers of under-construction properties will be the net outcome of savings on currently unoccupied key taxes and the percentage increase in GST rates over the existing tax rates. At present developers pay for the input taxes like- excise duty and central sales tax on construction materials. These taxes are not allowed to be outweighed against indirect taxes collected from the customers.
As per the existing tax regime, key taxes, like excise duty, central sales tax and octroi on acquirement of input materials, are paid by the developer at first and then passed on to the consumer. On the other hand, under the new tax regime, promoters would be able to get credit for input taxes paid, which would bring the cost of the construction on lower note. Also the contract between builder and suppliers will be brought under GST purview. It remains to be seen whether allotments such as parking and chosen location charges will also be measured to enforce GST.
Rajeev Talwar, chairman of realty developers’ body National Real Estate Development Council (NAREDCO) stated, “This will be anti-inflationary and won’t lead to any increase in prices for homebuyers and there won’t be any additional burden on customers.”
Mr. Mahesh Somani, honorable RERA expert of West Bengal Chapter, said, “Potential homebuyers of Bengal are more concerned of RERA implementation than GST roll out. First thing first people who have found ideal residential properties in their preferred location through any leading property portal in Kolkata are eagerly waiting for the state to submit their draft RERA rules. RERA will bring back accountability and clarity in entire realty practice. GST implementation won’t increase the current real estate market price as it’s a long time now that the market has been going through the slump. Under this circumstance, property price hike will flatten then sales graph even worse. I’m sure government wouldn’t want to harp the GDP of the country.”
-LNN (Liyans News Network)