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

  1. 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
  2. Land component not adequately split in real estate deals hence issues like
    1. Higher tax rate of 12% vs 5%-7% earlier
    2. How to consider land cost in revenue sharing agreements
  3. 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
  4. 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.
  5. Dealing with unregistered vendors like small real estate agents, labour contractors etc would attract reverse charge(However this is suspended till Mar-2018)