The second half of real estate tax bills are coming within days. Mahoning County Treasurer Dan Yemma has announced that property owner’s second-half real
What is the impact of GST bill on real estate industry?
The overall rate of tax has gone up from 5%-7%% to 12%. This has disturbed the market for under construction properties, as buying a ready property with OC is now cheaper. Besides, following other issues
- credit of tax on works contracts can be availed only if the output is also works contracts – specifically for developers, while the sub contract work is ‘works contracts’, the output is ‘construction services’. This is not too logical
- Land component not adequately split in real estate deals hence issues like
- Higher tax rate of 12% vs 5%-7% earlier
- How to consider land cost in revenue sharing agreements
- GST triggers as soon as the JDA is signed – on the premise that the consideration is already received form the Land Owner. This causes cash flow issues
- Builders are supposed to absorb the increase in GST and not pass it to the customer. So suppose 60% payment remaining, then builder absorbs excess of 12% over old rate say 7%, or 5%. His profit margin on project comes down by 5%*60% or 3%. No wonder builders are proactively offering GST Discount now to avoid anti profiteering proceedings, to ensure they are not jailed.
- Dealing with unregistered vendors like small real estate agents, labour contractors etc would attract reverse charge(However this is suspended till Mar-2018)