The implementation of GST has been the greatest tax reforms in the economy of India since the independence. The tax structure in the country had been ambiguous. With the inception of GST, the tax mechanism in the country has gained clarity. Well, developers and homebuyers are keen to know the impact of GST on Real Estate. Before you make an investment, you should be aware of the effects of the tax reforms on the real estate sector in the country. Here are six important aspects you should know about GST on property:
18% tax will be imposed on real estate
According to the revised norms of the government, the tax on under-construction properties will be 18%. This includes 9% SGST and 9% CGST. The government has also reduced the value of land to one-third of the amount that is charged by the developers. Therefore, the effective tax rate comes to 12%.
Property tax and stamp duty are to be subsumed
According to the new norms in the real estate sector, registration charges and stamp duties are not included in GST. The reason is that these are levied by the state, while property tax is levied by the municipality. In certain countries, GST has been implemented on immovable properties as well.
People need not file detailed returns this year
KPMG Partner (Indirect Tax) Priyajit Ghosh states that the new laws posed a challenge on the ground of compliance and the government has agreed to view it with leniency in the months to come. The government has stated that traders need not file a detailed return and only a summary would be sufficient.
Redressal of taxation issues to become easier
After the implementation of GST on property, it will be easier to deal with certain taxes. No overlapping jurisdiction will exist between the States and the Centre, regarding the levies on goods and services. However, other issues related to composite and mixed supplies and classification can crop up.
Transaction period to be a pain for consumers and developers
Experts are of the opinion that once GST on residential property is implemented, ambiguity will creep in during the transactions in real estate. They need to be sure about how the ITC will be calculated. Therefore, the time period for transactions may be a matter of concern for the developers and the homeowners.
Unregistered vendors may turn out to be a headache
While considering the GST impact on housing, it is necessary to consider the unregistered vendors. They might turn out to be a headache. Now, the liability to pay the taxes has been shifted to the receiver from the provider. Purchasing a property from an unregistered vendor will involve the payment of a reverse charge. After the implementation of GST, corporates are not likely to make purchases from unregistered dealers.
Well, the property prices after GST are also likely to change. The regulatory mechanisms have brought about a greater amount of transparency in the industry. Both developers and homeowners are likely to benefit from the same. The real estate industry is likely to grow at a good rate in the coming years.
