Ever wondered how GST will help the real estate sector? Well, developers believe that the real estate sector will benefit from the GST because it will overcome the present regime of twofold and triple tax collection. GST will become active across the country from July 1. Experts believe that this will bring a great level of straightforwardness and transparency to the sector and even limit questionable transactions. This indirect tax is expected to bring uniform taxation and touch all sectors.
This includes real estate too. As it is an indirect tax borne by the consumers, homebuyers are under a lot of stress as to how the tax will affect them and whether properties will turn out to be costlier after it is implemented. What they are not aware of is that GST will rescue consumers from paying various state taxes at various levels. In the long run, it will bring standardisation and homogeneity into the real estate sector. Compliance costs are also about to go down because of one a single unified tax.
However, the service charge levied on purchase of property may push costs up a bit. In fact, whether home buying will become costlier or cheaper depends on the final applicable tax rate. GST is set to benefit both developers as well as homebuyers. Not only will this sector become more streamlined, it will save buyers from multiple taxations. Developers will benefit from the significant reduction in tax management expenses. GST will result in a change in outlook in terms of a solitary tax structure.
It will be significantly lesser than the current service tax, excise duty and all the charges levied on construction goods and imported products. As per industry specialists, if a homebuyer purchases a property under development, the service tax payable on the project under development will be replaced by GST. Those who are not aware, currently there is a reduction in land cost for ascertaining service tax under development properties. This comes to around four percent service tax.
Presently, developers charge a variety of taxes at various stages and at varied rates die to a lack of clarity. There is VAT, service tax and other indirect charges such as entry tax, excise duty and octroi. GST is the answer to bring all these under one roof to make the process simpler than it is now. However, it is still early to measure the impact of GST on real estate sector. There has to be lucidity on the rate to be proclaimed, writes Realty Fact. Now that Lok Sabha has already passed four bills related to the GST, the deck is absolutely clear now.
GST is undoubtedly the single-most significant indirect tax reform undertaken until now. It will provide the required boost to the economy of India and will streamline and unify the tax structure of the country. Initially, most of the real estate components may stay out of GST’s radar, but sooner or later its impact will be felt in the real estate sector.