GST Likely to Increase the Price of Properties
Jun 12, 2017 Real Estate News
This year has been exceptionally good for the home buyers. With the reduction in the price of properties, lower interest rates, and more and more affordable homes projects being unveiled by the builders, potential buyers are having a good time. But the recent introduction of GST may increase the cost of the properties. According to the new law, GST of 12 percent will be applicable to the real estate sector. Real estate sector experts point out that this may come as a burden for the buyers.
The major indirect taxes levied on the real estate sector are excise duty, value added taxes, and service tax of 9-11 percent. Not only has this but the buyers also had to pay the stamp duty which differs from state to state.
All the above leaving the stamp duty would be under GST under the new indirect tax regime. This will also allow the input tax for the builders. However, more clarity on the abatement rate on the land is still awaited.
Few experts also point it out that the total taxes are around 9- 11 percent now, and the 12 percent GST will not affect the prices. The entire input credit is also allowed in the sector. This should make people fall under the tax net and promote more and more cashless property transactions.
The buyers who are buying the under construction properties will be affected too. The net effect on GST for these buyers will be on the savings on the currently unabsorbed input taxes and the increment of GST on the current tax rates.
As of now, the input taxes such as excise duty and central sales taxes on the construction materials that are paid by the developer are not allowed to be offset against the indirect taxes collected from the customers. According to the new scheme, taxes such as excise duty, central sales tax, and octri on the procurement of input materials are paid by the developer initially and then will be passed on to the buyer. However, the developers will be able to get the input tax credit for the same which can reduce the prices of the real estate properties.
The chairman of realty developers body National Real Estate Development Council (NAREDCO), Rajeev Talwar has assured that the prices will not be affected due to GST and the buyers will not be burdened by the cost.
Works contract between the realty developer and service provider has been brought under the ambit of the GST, it remains to be seen whether the components like parking and preferred location will levy GST.
The major indirect taxes levied on the real estate sector are excise duty, value added taxes, and service tax of 9-11 percent. Not only has this but the buyers also had to pay the stamp duty which differs from state to state.
All the above leaving the stamp duty would be under GST under the new indirect tax regime. This will also allow the input tax for the builders. However, more clarity on the abatement rate on the land is still awaited.
Few experts also point it out that the total taxes are around 9- 11 percent now, and the 12 percent GST will not affect the prices. The entire input credit is also allowed in the sector. This should make people fall under the tax net and promote more and more cashless property transactions.
The buyers who are buying the under construction properties will be affected too. The net effect on GST for these buyers will be on the savings on the currently unabsorbed input taxes and the increment of GST on the current tax rates.
As of now, the input taxes such as excise duty and central sales taxes on the construction materials that are paid by the developer are not allowed to be offset against the indirect taxes collected from the customers. According to the new scheme, taxes such as excise duty, central sales tax, and octri on the procurement of input materials are paid by the developer initially and then will be passed on to the buyer. However, the developers will be able to get the input tax credit for the same which can reduce the prices of the real estate properties.
The chairman of realty developers body National Real Estate Development Council (NAREDCO), Rajeev Talwar has assured that the prices will not be affected due to GST and the buyers will not be burdened by the cost.
Works contract between the realty developer and service provider has been brought under the ambit of the GST, it remains to be seen whether the components like parking and preferred location will levy GST.
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