This year, the real estate industry in India is set to undergo major transformation with the imple-mentation of the Real Estate Regulation and Development Act 2016 (RERA). Another significant change is the implementation of the Goods and Services Tax (GST) from July this year. We find out how does GST impact the real estate in India.
Regulation of prices
Though there has been phenomenal growth in Tier 1, 2, and 3 cities, they have not been suitably supported by prices. GST will definitely help in price regulation in this sector. Immovable property transactions, or transfer through the sale of im-movable property upon completion, would still carry on outside the realm of GST. However, the new GST regime will enable proper indirect taxation of real estate transactions.
Uniform tax structure
Existing tax liabilities on homebuyers are likely to remain unaffected upon the introduction of GST. At present, a homebuyer ends up paying a number of indirect taxes, which include VAT, service tax and excise duty, amounting to 11 percent, exclusive of Stamp Duty.
As per the new GST regime, indirect taxes will not be counted, and a uniform 12 percent for purchase of new residential property will be put in place, exclusive of Stamp Duty.
Impact of GST on commercial property developers
Once GST comes into force, a smooth flow of credit and minimization of the unavailability of construction-related credits can be removed. This may bring down project costs, resulting in lower rentals. GST, along with RERA, will help the real estate industry in taking massive strides in ensuring transparency.
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[“Source-ndtv”]
