Introduction of GST is one of the gigantic reforms that India has seen since independence. It’s bound to have far reaching effects on all the sources of production, including Real Estate, as well as our GDP.
As of now, we are having multiple Taxation policy. That means a consumer has to pay several taxes on purchasing a single product. VAT, Excise & Service Tax are the main taxes. Furthermore, under our Constitution, powers to levy taxes are vested with the Central & State Govts both. Therefore, VAT & other taxes on products differ from State to State. Under the existing system, neither it’s, nor could uniform taxation be possible. As a result citizens of the nation residing in one State pay less while those living in some other State pay more for buying the same product. Sometimes, there is also double taxation which affects our economy adversely.
In order to eliminate all these anomalies, the Govt has brought a legislation to club all the multiple taxes & replace with a single tax, popularly known as GST in short, and Goods & Services Tax in its full form. The legislation stands signed by the President and has become an Act. This Act is set to be implemented w.e.f. 1st July 2017.
Tax Slabs Under GST:
There are four Tax slabs under the GST. These are i) 5%; ii) 12%; iii) 18% & iv) 28%
Some essential products like food grains & food products have been kept outside the GST and there will be no tax on such listed products.
Impact of GST on Real Estate:
In India, Real Estate Sector accounts for +5% of GDP. This sector is the second largest Employer of all the production sectors. Introduction of GST is one of the gigantic reforms that India has seen since independence. It’s bound to have far reaching effects on all the sources of production, including Real Estate, as well as our GDP.
Like all other products, Real Estate has also been reeling under the current multiple taxation. A buyer of a property has to pay i) VAT; ii) Service tax; iii) Stamp Duty iv) TDS; and some other levies that differ from State to State. Overall, Developers & Builders will pay on the lesser side. This will reduce the cost of construction to some extent.
Categories of Real Estate:
Real Estate has been divided into 2 main categories for the purpose of GST. These are;
A) Under Construction
B) Ready To Move
Property has been placed under work contract @ 12% Slab . But this does not include the Stamp Duty on Registration of the property.
Benefits of GST:
With the introduction of GST, the consumer will be benefitted in several ways.
• It’s a Uniform Tax on same product across India and all the consumers will pay equally.
• It will increase the Tax collection of the States
• It’s a simplified procedure and easy to follow.
Briefly, with the introduction of a new Tax Regime, both the Consumers, as well as the Builders, have reasons to smile.