As per the data by Crisil, developer or promoter pays 27.7% and 18.1% towards cement, steel and this varies from state to state. As per GST, cement and steel will be taxed 28% and 18% respectively and other aspects of construction goods like paint and white goods would be taxed at 18%. But the final product,s like the apartment or home would be taxed 12%, with allowance of credit against taxes paid on inputs.
As the center and state have levied taxes of 12% on finished houses or apartments, there are chances of prices to fall by 5% on apartments. Once GST is implemented, homebuyers do not have to pay 4.5 %service tax which they pay while taking the possession. So as per statistics, the net price of houses in the affordable segment which cost up to 30 lakhs should fall by 5%.
Credai chairman and CMD of ATS infrastructure Geetambar Anand said that the 12% GST would benefit projects which cost up to Rs 6000 per sq ft, Premium project may not get the same benefit from this rate as builders and promoters consider high margins in such projects.
Also Read: List of GST rates
Many said 12% is favourable rate for home buyers and would lead to lower tax liability or be tax neutral. If a developer would sell the house at Rs 3000 per sq ft on built up area, he would pay tax of 12% on the final cost, therefore his fresh tax liability would be nil. But now under GST, developer can claim only up to his fresh tax liability, also due to this now the homebuyer does not have to pay 4.5% service tax. But if the project is under premium segment then it is difficult to bring down the fresh tax liability to nil. But overall the net tax liability on finished product would be 12% which is significant gain to home buyers .