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At all if goods and services tax (GST) gets implemented, it will perhaps streamline diverse taxes enforced on real estate developers, thereby resulting in bringing down the costs. Analysts of Radiant Group believe that GST will activate demand in the real estate sector, which is otherwise battling stagnation for couple of years. Whereas, a ready-to-move home will remain unaffected by GST since buyers pay stamp duty to the government, it might lessen costs for under-construction properties.
The course of this bill is expected to have a positive impact on the real estate sector, which has connections with over 250 subsidiary industries. It is believed that unified taxation will also inculcate the desired transparency into our taxation system. On the whole, the bill is likely to have an enduring and progressive impact on the economy, boosting the customary business outlook in the country.
The ultimate benefits to homebuyers will rely on the rate set by the government. According to some analysts, if the rate is less than the 15% service tax, it will surely be beneficial for buyers. The chairman of Radiant Structures, the best real estate company in India, said that GST will directly impact real estate regarding the tax outflow for developers and consumers will depend on whether the ultimate GST rate is more or less than the taxes paid presently. India is estimating a gross domestic product growth of 7-7.75% for 2015-16.
At present, a real estate developer has to bear assorted taxes during the construction of a project including central sales tax, value-added tax (VAT), service tax and customs duties among others. As far as commercial properties are concerned, GST will decrease taxation since developers will be able to acquire input credit of GST paid for construction services against the GST charged on lease rentals.
According to experts, to purchase an under-construction flat, it is mandatory for a buyer to pay both VAT at 1% and service tax at 4.5% in Maharashtra. This amount varies from state to state. Moreover, developers have to pay additional indirect taxes during procurement, which adds up to the overall cost of an apartment.