GST that works on the principle “One Nation, One Market, One Tax” seeks to transform the complete tax system of India. GST are divided into five tax slabs for the collection of tax – 0%, 5%, 12%, 18%, 28%. The tax system in India had a cascading effect, there was a tax on tax. GST simplifies the complete tax system to eradicate the multiple tax system such as VAT, service tax, central sales tax, entry tax, luxury tax etc. Real estate is one of the most crucial sectors of the Indian economy which is contributing about 5-6%a to the GDP on India. It is the second largest employer in the economy after Agriculture sector. According to the report by CREDAI and JLL India’s real estate sector is going to USD $180billionb industry.
Impact on buyers and investors
| Before GST | After GST |
| · The construction status of the property will decide the types of taxes the buyers are liable to pay these varied state to state. – (Property under Construction) buyers were liable to the VAT, service tax, stamp duty and registration charges. – (Property after Completion) buyers were liable to stamp duty and registration. | · GST simplifies the overall purchase price. · All the property under construction will be charged 12%c of the property value which excludes the stamp duty and registration charges. |
Impact on developers
| Before GST | After GST |
| · Developers were liable to pay central excise duty, VAT, customs duty etc. · Also, they have to pay other charges like approval charges, legal charges, architectural charges, labour taxes etc. which at the end burden comes on the buyer. · Before GST a huge amount of real estate expenditure undergoes unrecorded. GST will cut down this due to cloud storing of invoice. | · Under GST Cement will be taxed at the rate 28%d Iron rods and pillars will be taxed at the rate 18%e.· Reduction in the cost of logistics. |
· The developer will be entitled to acquire input credits on the sale of property under construction against the taxes paid by the buyer.
Under GST real estate industry are also going under automation. Automation will provide ample amount of benefits such as time compliance, generation of the report, comparison among the reports, cost-effective with reduced staff and much more.
Post GST:
- The transparency in the system is increased as the developers can buy the raw material only from the registered vendors.
- The complex process for buying a home has become simplified.
- The foreign investment is also increased as the tax system is simplified without giving them the burden of multiple taxes which will lead to improving the overall quality of Indian standard.
- GST and RERA together will bring in more transactional transparency into India’s real estate sector.
References:
aSource(IBEF) on 20-06-2018
bhttps://economictimes.indiatimes.com/wealth/personal-finance-news/indian-realty-sector-market-to-reach-180-billion/articleshow/63301570.cms
chttps://www.livemint.com/Money/M5Boa7PF4LHY3o10rdbCyO/How-GST-is-charged-on-houses-under-construction.html
dhttps://cleartax.in/s/impact-of-gst-on-the-cement-industry
ehttps://economictimes.indiatimes.com/industry/indl-goods/svs/steel/steel-industry-likely-to-benefit-from-gst-rate-stands-at-18-per-cent/articleshow/58751901.cms (20-6-2018)
Paarth Infrabuild, Real Estate Developers, Lucknow, Uttar Pradesh, India
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