Published on Monday,
The real estate market has always been an investment risk. However, the recent implementation of GST is a silver lining. The bedrock of GST will lay down a streamlined foundation for the real estate sector. Given below is everything you need to know about the real estate industry, post-GST.
What is GST?
GST stands for the goods and services tax. It is the biggest tax reform undertaken by the government in recent times. It was rolled out on the first of July, subsuming indirect taxes and implementing a simpler, more uniform tax.
The second question that may come to your mind is, ‘How does this help?’. While the prices of the properties may or may not come down, the real estate sector will be streamlined. The developers will have to give an outline of what they are providing and the exact amount of time it will take for the construction to be inhabitable. Promises made by the developers will have to be kept. For people looking to invest in real estate development, this is excellent news.
To keep it simple, here is a list of benefits of GST on real estate development in India.
1. One consolidated tax: The motto of GST is “One Nation, One Market, One Tax”. The pre-GST tax was very complicated and hard to calculate. There were taxes on the construction status, the service tax, the VAT, etc. There were different taxes applied on properties that were under-construction and different ones on ready to move-in properties. GST is a simple tax that is applied only to the final price.
2. Under-construction properties are more profitable: After GST, the effective tax on under-construction properties is 12%, excluding stamp duty and registration. This is due to input tax credits. However, GST does not apply to properties that are ready to move into. This means that either the tax burden for these properties will have to be handled by the developers, or the price of these flats will increase.
3. Transparency: The GST has made the tedious task of paying tax a lot easier to understand. There is only one tax to consider, which makes it very simple. GST also ensures that there is no double taxation or ‘tax on tax’.
4. Lower costs for developers: There are no major changes in the construction taxes. Since the cost of logistics has reduced, expenses should decline. The reduction in price, as we know, will have a domino effect.
The GST will ensure that the real estate sector will be better monitored and controlled. Due to its tax neutrality and streamlined structure, the benefits of GST will make your search for the perfect home a lot easier.