Impact of GST on Indian real estate sector

From ( 0 ) reviews

Written by: ADMIN

The long-awaited revolutionary tax has finally been introduced. GST seeks to transform India with its One Nation, One Market, One Tax principle, and all signs indicate that India,s real estate sector won,t be left out of the transformation. The real estate sector is one of the most pivotal sectors of the Indian economy. It is the largest employer in the economy after agriculture, contributing an average of 5-6 percent to the GDP - a contribution that is set to grow at a compounded annual growth rate (CAGR) of 30 percent over the next 10 years. By one account, the sector will be worth a staggering $180 billion in revenues by 2020. In the past, the real estate industry was embroiled in disputes due to ambiguity in provisions as well as multiple taxation. GST is expected to simplify taxation compliance and have a positive impact on the industry as a whole. Under the earlier law, buyers were liable to pay taxes depending on the construction status of the property, i.e., whether the property was under construction or complete. When purchasing a property under construction, a buyer was subjected to the payment of VAT, service tax, stamp duty, and registration charges. Properties purchased after completion were exempt from VAT and service tax, and only stamp duty and registration charges were payable. Moreover, the state where the property was located was also a relevant consideration because VAT, stamp duty, and registration charges - all being state levies - varied from state to state. The biggest takeaway is that GST is a simple tax that applies to the overall purchase price. All properties under construction will be charged at 12 percent of the property value. This excludes stamp duty and registration charges. For completed properties, the earlier provisions will continue and buyers will pay no indirect tax on sale of ready-to-move-in properties. Previously, developers were liable to pay customs duty, central excise duty, VAT, entry taxes, etc. on construction material costs. They also had to pay a 15 percent tax on services like labor, architect fees, approval charges, legal charges, etc. Eventually, this tax burden was transferred to the buyer. Under the new regime, however, the changes in construction costs are not as difficult. For instance, cement will now be taxed at the rate of 28 percent under GST. This is higher than the current average tax rate of approximately 23-24 percent, but a lot of additional taxes charged over the average rate will now be subsumed under GST. Iron rods and pillars used in the construction of buildings are now charged at the rate of 18 percent, which is less than the previous average rate of 19.5 percent. Furthermore, the reduced cost of logistics will result in a reduction of expenses as well. The input tax credits will also help in increasing profit margins. A developer will be entitled to take input credits on the sale of property under construction against the taxes that are paid by the buyer. All this is expected to bring down the project cost to the developers, and the developers will have to pass on the benefit of the price reduction to the buyer. Prior to GST, a huge percentage of each real estate project expenditure went unrecorded in the books. GST will cut down this percentage due to cloud storage of invoicing. The real estate sector will also benefit with the new tax law having a positive effect on all ancillary industries since this sector has a stimulating demand for more than 250 ancillary industries.

When you call, don't forget to mention that you found this ad on infooy.com

Add your comments

Please use the below comment box to insert your comment

Your rating


Sponsored posts

Brand New 2BHK Flat

Brand New 2BHK Flat 680 Carpet without Deck-96 Lacs All inclusive - Bhayandarpada, Thane, Maharashtra - 2BHk 680 Carpet With Balcony at 96 Lac All Inculsive with 1 Car Parking. Possession Dec 2021. For More Details Call - Pratiom Housing ...

Read More

New 2 BHK Ready Flats

New 2 BHK Ready Flats opp Mahendra Showroom Sch No 114 A B Road. Prime location main road Touch Flats in Your Budget. Upto 90% Bank loan available from all leading bank. Purely Quality Construction. RERA Approved. Amenities:- Modular Kitchen. PO ...

Read More

Spacious 2 Bhk Homes

Spacious 2 Bhk Homes in Kasheli, Thane - The property has 2 Bedroom 2 balcony Property is built in 700 sq Ft (Builtup area) available at an expected price of 30 lac Located on 2nd of the 4 floors It is a freehold property The property will come with ...

Read More
Back To Top
free classifieds | free classified ads | post free ads | Infooy®