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The real estate market in India is currently disturbed with the challenge of managing an array of multiple taxes, some at the State and some at Central level, like the Service Tax, VAT, Stamp Duty, Registration Fees, Excise, etc. However, the people are quite hopeful that GST will bring in a comprehensive and unified taxation structure ensuring greater reliability and transparency in this sector and will make property in India an attractive investment option.
The introduction of GST shall have a deep impact on the real estate industry as by paying one single tax, the buyers will be saved from the entangles of paying multiple taxes at the time of property purchase.
The enforcement of GST (Goods & Services Tax) with effect from 1st July onwards will prove to be a major game changing regulatory reform for the entire nation, especially the business sector. As per NAREDCO (National Real Estate Development Council), a 12 per cent GST on all the construction projects will provide a major boost to the real estate sector which is currently looking for buyers for pushing the sale. A single, stable GST rate of 12% including the land value and full input tax credits is happily welcomed by the otherwise heavily taxed property market. Incorporating more than 16 taxes and levying a single GST will prove to be a landmark reform for the Indian real estate market as this new unified tax regime will put an end to the undesirable practice of double taxation which inflated the prices for the end users and hurt the sentiments of the property market as well as other sectors.
The NAREDCO is also hopeful that the GST Council shall cater to the issues related to affordable housing which had a service tax exemption in the previous taxation system. NAREDCO feels that the actual taxes levied under GST shall be lower or equal to the current multiple indirect taxes being charged.
Offset by input credits, the GST rate of 12% for work contracts or finished products will ensure a simplified and flawless taxation regime. The tax credits for inputs like paints, cement, steel, etc. will lower down the burden of development and will bring down the cost for builders. It will save their time and effort on completing the paperwork required at various points. The reduction in taxes will reduce the prices of the properties resulting into an increased demand and thus benefitting both buyers and developers.
The boost given by GST to the Indian real estate industry is a positive feature since this industry is the second-largest employment generating sector of the country and contributes approx. 5% to India’s GDP.
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