Understanding GST, the realty way

With the safe passage of Goods and Services Tax (GST) bill in Lok Sabha, trend watchers are anticipating the course in Rajya Sabha as and when bill will be presented on table. Those who do not understand the impact of the Bill in the real estate industry, here’s a quick summarization.

Impact on consumer

One of the tax experts and specialists on Indirect Taxes in Tax Sutra, Aditya Nadkarni says, “As a home buyer has to pay multiple local and state charges such as registration tax, stamp duty and property tax. GST won’t make a direct benefit on the total cost. In fact, home buyers are not levied with sales tax while buying a residential property. Developers, on the other hand, would incur additional taxes during procurement of raw material which means they would pass on the implications which can impact the consumer at the later stage.

How would the builders be impacted?

While acquiring raw materials and construction related equipments from other state, a developer needs to pay Octroi charges which will be replaced by GST. Octroi is expected to be marginally higher than the former tax component. Currently, except for basic building materials such as bricks, cement and floor tiles, other secondary items are charged with sales tax of 5 per cent which will now change to GST which would be 6 per cent, projects experts.

Quoting importance of GST in Indian tax regime, N K Chaudhary, director, Groundbrakers, one of the tax consultant firm in Delhi says, “Although GST would replace the multilayered tax system levied on goods and services, the percentage of the taxes would differ as per sector and can impact the real estate if the total quantum of tax received exceeds the previous regime.”

Will the house cost increase?

Since it would be builders who would be facing the heat while procuring materials, they may or may not pass on the impact to the buyers. If the increased tax cost would be transferred to the final product, chances are high that the residential property prices would get inflated, close to two per cent.

If you are a new buyer, this can be a good time to get into the property market as once GST bill gets passed; chances are high that you will need to pay more for same.

SOURCE: Magicbricks