Impact of GST on Real Estate Sector- New Tax Rates and Conditions

The impact of GST on real estate sector lead to more confusion than clarity. Before implication of GST law, buyers were liable to pay taxes depending on the construction status of the property. Which whether the property was under construction or finished. When a buyer purchase an under construction property he/she had to pay VAT, service tax, stamp duty, and registration charges. For complete property, VAT and service tax were exempted and only stand duty and registration charges were payable.

The earlier indirect tax system had challenges of cascading of taxes, complexities and multiplicity for both seller and buyers. GST, which has been implemented from July 2017, give a sigh of relief to the taxpayer by bringing transparency, changing multiple taxes into single unit and reducing the cost of buying houses for buyers as in the previous tax regime.

Now coming to the point, after the implication of GST the whole tax system become easier and simpler than before. The government has decided to not include stamp duties under GST law. Moreover, all construction properties will invite a GST 5 percent with no input tax credit. Along with that, GST will not be applicable to ready to move properties. The carpet area of property in the metro cities up to 60 square meters and in the non-metro 90 square meters condition comes under the affordable housing scheme.

The GST council, on March 2019, released a transition plan for the implication of the new tax structure on housing unit. According to this plan, builders will be allowed to choose between old taxes rates and new for under-construction residential projects, to help resolve input tax credit issues. In short, the dealer of under-construction residential projects have a liability to choose between the old tax regime or go with 5% or 1% rates, without ITC.

GST Rates on Purchase Flats, Homes, and Property under CLSS.

As per the 5 (b) of schedule II of CGST Act 2017, there will be no GST on resale, completed property or flats. Whereas for home purchase, the individuals can cut the rate from 8% to 1% only when the rate of house is lower than 4.5 Lakhs.

Impact of GST on Real Estate affect the ranking:

There is no doubt the impact of GST and demonetisation drop down the ranking of real estate. Mumbai real estate market has fallen to 12th rank and Bangalore and Delhi real estate market which always on 2nd and 3rd position has fallen to 13th and 15th rank. Real estate is still recovering from the damage of demonetisation.

File the return is complex:

Another negative impact of GST on real estate is filling the return. It is very difficult for the developers to file the returns thrice a month. This make filling the return tedious and difficult for business because they have less number of accounting professionals.

Impact of GST on buyers:

Prior GST, buyers had to pay VAT, service tax, stamp duty tax, and registration charges on purchasing under construction property. For complete property they only need to pay stamp duty and registration charges. Under GST, a single tax rate of 12% is applicable on properties under constructions while GST is not applicable on complete property. Hence on purchasing complete or ready to sale properties buyers will get benefited.

Impact of GST on Developers/builders/Contractors:

Prior GST, developers had to pay exercise duty charges, VAT, custom duty, entry taxes etc. Input and service tax on various input services like raw material, architect professional fees, legal charges, labour charges etc. Under GST, developers and constructor cost is significantly drop down due to the elimination of multiple taxes and availability of ITC

Impact  of GST on Stack holders:

The impact on services like labour, material suppliers, service supplier so forth is depend on the increase and decrease taxes on these goods and services. Just like GST rate on sand is 5%, cement is 8%, steel 18% etc.

Expected benefits of the impact of the GST on real estate sector:

  • The every growing industry, the real estate industry got a big relief from the multiple taxes like VAT, service tax, stamp duty, registration charges etc.
  • The reduction in GST slab from 12% to 8% was a direct attempt to boost property sales in the lower-budget segment.
  • Unlike the previous tax regime, GST norms encourage the rental market, boosting the sales than last year.
  • As per the Indian Development Update, which is published by the world bank. India is one of the fourth nation in this world which simplifies the tax regime.
  • Impact of GST on real estate reduce the ambiguity which often face in the prior tax.
  • Online GST portal huge benefits to the developers while filing return.

Final say:

Impact of GST on real estate is positive and negative. One of the greatest downside of GST on real estate market is filling return thrice a month. But, thanks to GST service providers, who are round the clock available for the help of the individuals who may feel difficulty in filling GST return. Unilex Business Consultants is one of the leading GST service providing companies which will help you regarding GST issues.


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