GST Impact on Real Estate - #VarmaHomes
GST Impact on Real Estate - #VarmaHomes
From July 1 2017, Goods and Services Tax (GST) effectively cuts through a confounding Gordian knot of taxation complexity in the country. In other words, it will replace the multiple taxes levied by the state and central governments and will become incorporated of all the indirect taxes, including commercial tax, value-added tax (VAT), service tax, central excise duty and octroi tax/charges. The switch-over to the GST (Goods and Services Tax) regime is undoubtedly one of the biggest tax reforms in post-independence India.
GST has been primarily conceptualised as a ‘One Nation, One Tax’ philosophy and it will help:
• Eliminate the previous cascading tax structure
• Ease compliances
• Create uniform tax rates and structure
• Reduce additional tax burdens on consumers
The Indian real estate sector has been going through significant transformations in recent times. The latest Real Estate and Regulation Act (RERA) has already started addressing the issue of non-transparency and affixes a level of accountability on real estate builders and brokers which is exceptional in the history of the Indian property sector. For the real estate sector, the implementation of GST will definitely be a positive sentiment booster among property buyers. GST may not be instrumental over the short term in bringing down the prices of residential real estate. As the accountability being fixed at every stage and the perception of the residential real estate sector will improve on the back of a simplified tax structure, it will, however, benefit all the stakeholders of the sector.
Benefit to buyers
A simple and transparent tax applied on the purchase price is the biggest advantage for property buyers. All under-construction properties will be charged at 12% under the GST regime (excluding stamp duty and registration charges) on property value, adding that it will not apply to ready-to-move-in and completed projects, as there are no indirect taxes applicable in the sale of such properties. In case of under-construction properties, levy of stamp duty and registration charges on the buyer will continue.
Benefit to builders
Under the current tax regime, a property developer is subject to central excise duty, VAT and entry taxes (levied by state) on construction material cost. On the services used (labour charges, architect fees, approval charges, legal fees, etc.), developers pay service tax of 15%. Real estate developers also grapple with the challenges of multiple-taxation and the cumulative burden eventually gets passed on to the buyer. As the benefit of input tax credit being considered as an added advantage, developers too will find the GST regime much simpler to work with.
Varma Homes is one among the best builders in Kochi offering high quality and new luxury apartments. We always create the best living spaces meeting the requirements of clients. If you are looking forward to buy new luxury flats and new apartments in Kochi, then contact us today. Call +91 9645 88 33 33 for more details.
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