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GST Impact on Real Estate

How Does GST Impact Property Scenario?





Even though unsettling, people in India are giving way to new reforms hoping it will change their present condition for the better. The GST tax is the biggest reform since the independence and is likely to eliminate the current ambiguous and complex tax structure. Let’s look at the things you need to know about this indirect tax regime:

  1. GST at 18% for real estate sector

The government has revised the tax to 18% on a under-construction property. This includes 9% for state and central government each. The effective tax is 12% as the government has allowed deduction of land value equivalent to one-third of the total amount charged by a developer. S Satish, Executive Director, RSM Astute Consulting Group says, “However, in the new regime the quantum of ITC will be higher though overflow of credit is restricted. The price of a property is an outcome of demand and supply dynamics, not taxes alone.” Ramesh Nair, CEO & Country Head, JLL India adds, “Imposing GST on land would have just resulted in land costs rising further at a time when the government is pushing its agenda of affordable housing nationally.”

  1. Eventually, Stamp duty and property tax to be subsumed

At present, the stamp duty and registration charges are outside the ambit of GST. This is because they are a state tax while property tax is a municipal levy. Satish points, “In many countries where GST has been implemented, it includes immovable properties as well.” It is a wait and watch situation.

  1. Detailed returns not required this year

KPMG Partner (Indirect Tax) Priyajit Ghosh said, “The government has said that a detailed return need not be filed by traders/businessmen only a summary return would suffice.” According to him, the law has its own challenges when it comes to abiding by it and thus the government is ready to take it easy for a couple of months.

  1. Teething issues inevitable

As per Gulshan Homez’s Deepak Kapoor rates in the previous regime were really baffling. He says, “Teething issues, inflationary pressures, and certain short-term adverse impact will make compliance difficult in the first 12-15 months. Tina Rakyan, director (Finance), Hines India adds, “But global precedence says that GST has been beneficial.”

  1. Easier redressal of taxation issues

With the elimination of overlapping jurisdiction between Centre and State, some tax issues will become easy. Ghosh elaborates, “Seeking redressal of a taxation issue would be far easier because in the new regime the same rule would apply to everyone.” But Satish adds that issues related to classification, composite and mixed supplies can arise.

  1. Difficult transition period for developers and consumers

Kapoor questions, “Post July 1, 2017, if an invoice for a unit has to be made, how calculations will be arrived at? If a customer wants to buy a real estate product on July 1, what should I tell him? Should I tell him that I am selling you my real estate but the actual price will be revealed after 3 to 6 months when I get my ITC details.” There will be a lot of ambiguity before things settle down.

  1. Unregistered to registered vendors

Unlike the past, the liability to pay taxes has shifted from provider to the receiver. Satish explains, purchasing from an unregistered buyer will attract reverse charge on the recipient which will add up to the final cost of the goods or services. Satish says, “Post-GST roll out, many corporate may not prefer purchases from unregistered dealers.”

Also Read: Ministry Of Urban Development Merge With Ministry of Housing And Urban Poverty Alleviation

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