With less than three months left for the application of Goods and Services Tax in India, discussions have warmed up among the realty experts about its impact on the Indian real estate market. Arun Kumar, Managing Director, Casa Grande Pvt. Ltd. says, “The changes under GST will ease the process of taxation considerably, making it easier and simpler for real estate developers as well as home buyers.” Not just him, a number of property experts share the same view about the rolling out of GST on 1st July this year.
The government is still not giving away any certain clues about GST’s impact on the buying and selling of property. Selling of land or building seems to be excluded from GST’s purview; however, Equated Monthly Installment (EMI) taken for buying under-construction property, and renting or leasing property would be under impact.
The Latest Updates About GST For Realty Sector
Land leasing, renting of building and EMI paid for buying the under-construction property would start attracting GST (Goods and Services Tax) from 1st July 2017. According to the latest updates rolled out by the government in view of GST, the sale of building or land would be kept out of the purview of GST. Yes, up till now, there is no information about the effect of GST on realty sector as the government has not entirely included real estate in the purview of the to-be-launched goods and services tax. "No such information (about the impact of GST on the real estate sector) is available with the Ministry," said Rao Inderjit Singh, Minister of State for Housing and Urban Poverty Alleviation (HUPA) in the written reply given to Lok Sabha.
As there were no clear updates provided by the government about the GST’s effect on real estate, this new indirect tax regime posing a negative impact on the Prime Minister Narendra Modi’s dream of “Affordable housing for all by 2022” became a hot topic of discussion among the realty experts. However, if M. Venkaiah Naidu, Minister for Urban Development, Housing and Poverty Alleviation is to be believed, GST would not lead to price rise in the realty sector.
“GST will not increase prices, especially not for affordable housing. We have already exempt affordable housing from service tax, and my ministry is addressing the need to continue this exemption under GST. We have recommended to the Ministry of Finance to tax the sector at a rate which is revenue neutral and not at a higher tax rate,” said Mr. M. Venkaiah Naidu.
A Brief Knowledge Of GST
GST aka Goods and Service Tax is a form of indirect tax that is an amalgamation of almost all the existing taxes into one. GST is said to be one of the biggest reforms made in the history of Indian taxation post-independence. This form of indirect taxation would mitigate the problem of double taxation in a big way. Various taxes levied by State like state VAT, luxury tax, entry tax, purchase tax, entertainment tax, tax on advertisement, tax on lotteries etc., and taxes levied by Centre like central excise duty, additional duties of excise, service tax, additional duties of customs etc., would merge into one form of indirect tax. From manufacturers and suppliers to end consumers, everybody would have to pay the comprehensive GST tax.
In the realm of real estate, GST would have a direct bearing on the rate of raw materials used for constructing properties; thus would be affecting real estate in a large way. With the numerous taxes amalgamating into one, there are high chances that the value of these construction materials would gradually go down and we would see visible impact of this on the cost of real estate.
GST would be applicable in India from 1st July 2017 and the population of India has put high hopes that the price paid to buy, sell and rent property in India would go down with its application. Builders, developers as well as the buyers, everyone is eagerly waiting for the next update on GST and how it would impact the Indian property market.