Whether you are an existing home owner or planning to buy one soon, here’s what you need to know about the impact of GST on the realty sector.
While the Goods and Services Tax (GST) has been implemented across the country, many doubts still prevail in the minds of property owners and potential buyers. “The switch over to the GST regime with its philosophy of ‘One Nation, One Tax’ has become one of the biggest tax reforms in India. There will now be a monumental increase in transparency and uniformity in the tax rates with minimal extra tax burdens.
The impact of GST on the real estate industry will decrease a lot of ambiguity. It has been made clear that under-construction flats would be charged at an effective rate of 12 per cent on sale value. For projects, wherein Completion Certificate Occupation Certificate is received, no GST is applicable on the sale of such properties,” says Prakash Challa, Chairman-Direct Taxation, CREDAI.
Experts believe that the implementation of GST has simplified the taxation process. Instead of paying VAT and service tax, buyers now only need to pay GST, subsuming all other indirect taxes into one. This change in policy will be more customer-centric and delivery focused.
Here are some of the most important things to know about GST for your property:
The intention of GST is to bring efficiency into the entire tax system, and its implementation will see some initial issues. But eventually, it will pave the way for an extremely efficient tax system.
“The levy of GST is 12 percent but flat buyers should understand the details of Input Tax Credit (ITC) in GST regime. Buyers should know the construction stage of project as on 30 June, 2017, to calculate their ITC benefit,” says Ankush Asabe, Chairman and Managing Director, Shree Venkatesh Buildcon Pvt Ltd.
Deep Kantawala, head-ICS Real Estate Partners and CFOICS Group, a diversified real estate and financial services group, further explains:
Just like the earlier service tax regime, renting of residential property has been kept out of the purview of GST. However, the customer will be liable to pay GST in case of rented-out commercial property if the annual rent received exceeds Rs 20 lakh.
Processing fees payable on home loans will increase as they will be liable to 18 percent GST compared to the earlier applicable 15 percent service tax.
There will be no change in the stamp duty and registration costs irrespective of whether it is a new property, under construction property or a resale property. These levies continue to be state subjects.