Not completed apartments will come under GST wheel neither rental residential apartments will have to pay on this account. But rental commercial apartments will have to count up the service tax of 15% (currently) and this very charge is going to be replaced by GST implementation.
July 1st onwards, homebuyers will have to pay for Goods and Service Tax (GST) on EMIs paid for under construction residential units and on every affixed charge such as external and internal development charges, incidental location charges and club membership fees will be collected by the developers only. Experts suggest that this will boost the residential property sale in Kolkata as luxury inventories will be depleted faster than ever.
Residential units put on rent are free from this decree. Rather commercial units on rent will have to pay an additional service tax of 15%, which will be calculated as GST charge henceforth. Parliament passed four regulations on GST execution, as they want without any further delay, GST to be fully executed from July 1st.
This is still in the mist what would the exact percentage that would be levied on under construction residential units whether a lower rate of 12% or a higher rate of 18%. Unless this percentage doesn’t come in shape the cost of buildings (whether it will climb up marginally or diminish) won’t be properly figured out. The government is yet to put lights on whether the developers and homebuyers will stay in benefit of counting lower tax rate under the revised new scheme. According to the existing service tax regulation, for investors of under-construction residential units, a discount of 75% is permissible, if the entire usable possession area is within 2000 sq ft and sold less than 1 crore, holding the effective tax rate from 15% to 4%. Correspondingly, for the above 1 crore properties with of more than 2000 sq ft area the tax reduction will be 70% and the effective tax rate to be comported by the buyers is 5%. Before anything else let’s highlight that states also charge VAT besides the service tax. If the abatement rules are not taken in under the GST regulation, the relevant tax level will be above the cost of the residential apartment.
At present EMIs for ready-to-move-in apartments don’t exert a pull on indirect tax, but installments paid to the builder for an under-construction property court service tax of 15% on which discount is given. Now the argument here is that the builder is providing a service to a homebuyer by developing an apartment. The deduction rate is allowed to watch the value of the land involved in the construction of the apartment.
The decision of affordable housing segment will come up before July expected. The Ministry of Housing and Urban Poverty Alleviation (MHUPA) proposed to the central finance ministry affordable housing sector will be dispensed from service tax under the new GST regime. MHUPA also put forward that the states and union territories to regard as repeal or rationalization of stamp duty on affordable housing projects.
As of now the sale of buildings and lands won’t be monitored under GST regulation, whereas they will continue to attract stamp duties levied by the states. Electricity cost has also been enjoined from GST.
– By LNN (Liyans News Network)