Impact of GST on Real Estate

GST, the much-hyped revolutionary tax has finally been introduced by the Government of India under its "One Nation, One Market, One Tax" principle. The real estate sector in India is also undergoing changes with the GST.

Over the years, the real estate industry has been involved in disputes due to uncertainty in provisions as well as multiple taxation. With the arrival of GST, the simplified taxation compliance is expected to have a positive impact on the industry as a whole.

Here’s an insight on the impact of GST on real estate from Vishraam builders, the most eco-friendly builders in Thrissur with many projects like apartments in Thrissur.

Impact on real estate buyers & investors

The laws existing earlier stipulated that buyers should pay taxes depending on the construction status of the property. For an under-construction property, VAT, service tax, stamp duty, and registration charges apply. For completed properties, only stamp duty and registration charges were payable. VAT, stamp duty, and registration charges varied from state to state.

GST applies to the overall purchase price & is charged at 12 percent of the property value excluding stamp duty and registration charges. For completed properties, the earlier taxation continues. Buyers do not pay indirect tax on sale of ready-to-move-in properties.

Impact on developers

Prior to GST developers were liable to pay customs duty, central excise duty, VAT, entry taxes, etc. on construction material costs. Also 15 percent tax on services like labour, Architect fees, approval charges, legal charges, etc. were there and this tax burden was transferred to the buyer.

Changes in construction costs are affected as a lot of additional taxes charged over the average rate will now be absorbed under GST. GST has reduced the cost of logistics resulting in a reduction of expenses as well. This helps in increasing profit margins. GST taxation is expected to bring down the project cost to the developers, and the benefit of the price reduction will be passed on to the buyer.

A huge percentage of each real estate project expenditure went unrecorded in the books before GST. But today with cloud storage of invoicing, GST has cut this percentage down. The real estate sector will also benefit from the positive effect of GST on more than 250 ancillary industries which support this sector.

Input Service Distributor (ISD) concept

An ISD concept for suppliers has been proposed under GST for transferring the tax credit of input services between two or more locations.

Compliance requirements

With GST implementation, compliance requirements are bound to increase in real estate..

Need for automation

Businesses will need to bring appropriate changes to their IT systems to be GST compliance ready. With Automation will come a huge range of benefits like timely compliance, report generation, comparison of reports, decision making, cost-effectiveness with reduced staff, technical and online support, and more.

GST brings transparency in the functioning of the real estate sector, the overall increase in price for new residential properties could be lower than that for new commercial properties.

To book your flats in Thrissur, contact us at Vishraam Builders.

Vishraam Builders is the best apartments builders in Thrissur. Offers luxury flats and apartments in Thrissur with international standard of quality.