New Delhi: The all-powerful GST Council Tuesday approved a transition plan for the implementation of new tax structure for housing units, Revenue Secretary
What is the GST (Goods and Service Tax) and what will its impact be on the Indian economy?
4 Reasons why the Goods and Service Tax bill will impact the Indian Real Estate Sector
What is GST?
Currently in India, there are many direct and indirect taxes imposed on goods/services, right from its manufacture to its sale and eventual consumption, both at central and state levels, thereby unrealistically increasing overall cost to the end user.
To mitigate this burden, the Central Government proposed the Goods and Services Tax (GST). GST combines central excise duty, additional excise duty, service tax, state VAT & entertainment taxes under one banner.
Goods and Services Tax (GST) was introduced as a Constitutional Amendment bill in the Lok Sabha on 19 th December 2014 and passed by the house on 6th May 2015. However, it took more than a year for the Rajya Sabha to pass this on 3rd August 2016. The bill after ratifications by the states received the Presidential assent on 9th September 2016. GST is expected to come into force by 1st July 2017.
Implementation of the Goods and Services Tax (GST) will have a significant impact on the real estate sector, where, a property under construction, is taxed under VAT and Service Tax. The Goods and Services Tax (GST) will replace all these with a single tax, which shall, in the long run, reduce the overall cost of home ownership. The stamp duty and registration fees, however, will be outside the purview of the Goods and Services Tax (GST).
Latest Developments- In March 2017, the GST council, which met in the national capital, approved the State GST (SGST) and the Union Territory GST (UTGST) bills. The bills will now have to be cleared by Parliament and state assemblies.
The GST Council has approved rules and regulations on registration, payments, refund, invoice and returns. The council will meet again on March 31 to approve regulations on composition, valuation, input tax credit, and transitions. The Finance Minister exuded hope that Goods and Services Tax (GST) could be rolled out by 1st July 2017.
Here are 4 Benefits of GST in Real Estate Sector-
BENEFIT #1: Cost of home ownership: Goods and Services Tax (GST) will eliminate the restrictions on credit utilization. GST would lower the tax burden on input items like cement, steel etc., as tax credits would be available for set off at various stages leading to lower construction costs. This could lower the real estate prices and considerably benefit the common man.
BENEFIT #2: Unified Tax: It is significantly crucial in the real estate industry to have a uniform tax base which GST addresses. The developers currently pay tax on the purchase of raw materials. Once the taxes are uniform, the likelihood of paying lesser taxes will pass on to the common man/buyers as a benefit. Also, the other kind of charges like bundling in service tax with the abatements, collected by the developers will also be sorted once the Goods and Services Tax (GST) is implemented.
BENEFIT #3: Double Taxation: Ideally, in India anybody paying VAT on 70% pay service tax on 30%. But unfortunately, this concept do not synchronize well for the real estate sector because of unsynchronized methods of operation between the VAT and service tax laws.
If Goods and Services Tax (GST) is implemented, this problem can be mitigated as there would be a single transaction which would be taxed at Revenue Neutral Rate (RNR) as decided by the State Good and Services Tax (SGST) and the Central Goods and Service Tax (CGST) departments.
BENEFIT #4: More Transparency and Less Compliance: Currently, there is a high degree of overlap of tax bases and ambiguity on the rate of taxes. Implementation of Goods and Services Tax (GST) would provide an audit trail for better control and monitoring, benefiting the Indian real estate sector.
The enforcement of Goods and Services Tax (GST) will reduce the complexity of compliance bringing in efficiency and smooth transaction.
With ever changing norms and rules, as a residential property buyer, its best to check the property documents before buying a new property. To verify the documents of property you own or plan to buy, download the (Your Personal Property Lawyer on a Phone) from Google Play Store!