With The biggest tax reform in India namely GST (Goods and Service Taxes) going to be implemented soon, the entire real estate sector is likely to experience a new overhaul in the system. The Rajya Sabha and Lok Sabha had collectively endorses the Bill to even out GST and now, with every approval on board, GST is going to be implemented from 1st August 2017. It has not only steered the way for putting the indirect tax regime into service but has also infused an aura of hope among the builders and the buyers alike. However, the investors are not likely to be lumbered with any extra tax burden or cost. According to the tax experts, real estate is one of the most important sectors considered under the GST bill. All the residential, as well as commercial contracts, will be imposed a tax not more than 12%, thereby keeping it neutral and leaving no significant impact on the home buyers.
Impact Of GST on Real Estate
The taxation earlier was too complicated for home buyers. Buyers had to pay Vat, service tax, stamp duty and registration charges on purchase of an under construction property. Also the calculation of taxes was tedious in earlier regime. In current GST system a builder could take input credits on sale of under construction property against the taxes that are paid by the home buyer. Now since the VAT and service tax was lower in early regime the builder will have to pass on the benefit of the price reduction to the buyer.
Benefits to Buyers
A simple and transparent tax applied. All under construction properties will be charged at 12 % (excluding stamp duty and registration charges) No indirect taxes applicable in ready-to-move-in projects When the real estate sector is expected to make for around five percent of India's GDP and is esteemed as the second largest industry in the country, it is also reported to face certain issues regarding fiscal policies. And, in such context, when the confusions in terms of service tax, stamp duty, excise duty and VAT still persist, the implementation of GST is expected to put in a balance in the entire system. Also Read: List of GST rates in India With GST dealing with several indirect taxes, it's expected that the bill will ease out all the tax complications and reduce the reach for double taxation. So, even if the home buyers have to pay a little higher, there should not be any reason for them to brood over the same; rather, they should cheer on an array of benefits that the new GST is yet to offer. GST is deemed to add a significant per cent to the country's GDP, thereby heightening India's economy to a great extent and quite naturally, if the economy goes well, the real estate will experience more demand as well as supply. Although, no amount of research will help you get acquainted with right rate, still all the related studies reveal that the actual tax effect will be quite lower than the current one, thereby relieving the home buyers and the developers alike.
Last but not the least; GST is expected to tread through a long way and give the real estate sector a new high.
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