GST: What's In Store For Real Estate Sector

GST: What's In Store For Real Estate Sector

GST: What's In Store For Real Estate Sector
(Dreamstime)

The Central government recently announced the various rate slabs for the Goods and Services Tax (GST). The introduction of various slabs in the rate structure was something that was required keeping the complexities of the Indian market in mind. However, with the introduction of these slabs, there wouldn't be any major change in the overall rates and thus, no drastic drop in property prices. Yet, there is a hope among developers that the construction costs might come down by end of 2017 and thus, impacting the overall cost.

The four-tier tax structure, that includes 5, 12, 18 and 28 per cent duty to be levied on items consumed by common people with 12 and 18 per cent as standard rates, was predictable. In the structure, the highest slab has been kept for luxury items and is unlikely to be applied on  the real estate market. The two probable rates for the real estate are either 12 or 18 per cent, even though the sector still await clarity.

Moreover, the sector is waiting to know whether or not credit for input tax will be allowed, however, the input costs are not likely to go up. While predictions suggest that net increases in input cost will go up a per cent or two, the overall end prices are likely to go down because of much lower taxes compared to what buyers are paying right now.  At present, in a city like Mumbai, where most houses are priced above Rs 1 crore, a buyer has to pay a 4.5 per cent service tax, a one per cent VAT (Value-added Tax), stamp duty among others.

Till we get the final rate of GST for real estate, it is only advisable to understand how it works and how will it benefit investors, developers and buyers at the same time. However, in case we do get a higher rate,  i.e. 189 per cent, chances are that the cost of home might increase especially for those already under construction.

Though investors are going to take some time to assess the situation after the rates have been implemented i.e. post April 1, 2017, it is being predicted by experts that this move shall serve to lower inflation and we are hopeful for the same. The fact that the common man will now have a uniform tax structure according to the slabs shall come as a big relief from any form of hidden tax or cost. No matter what rates get applied, it will certainly reduce the tax burden on both developers and buyers.

In simple terms, GST is one indirect tax for the whole nation that will help in making the country a unified market. The implementation of this will ensure uniform tax rates and structures thus making the country tax neutral in terms of business.

Sushil Raheja is the CEO of Raheja Homes Builders & Developers. Raheja started his journey by selling properties and is now achieving his goals as a developer. He has sold around six million sq ft of premises and land in around 12 years. His vision is to take the business to another level, creating around 10-15 township projects in the upcoming years.

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