On the 3rd and 8th of August respectively, the Rajya Sabha and the Lok Sabha unanimously approved a bill to enable the rollout of GST – Goods and Service Tax, that is known to be one of the biggest tax reforms in India. From the 1st of July 2017, GST was effectively levied in the country. This tax replaces multiple taxes levied by the central and state governments and all the direct and indirect taxes, including central excise duty, commercial tax, octroi tax/charges, Value-Added Tax (VAT) and service tax.
The Indian real estate sector has been going through a significant transformation the recent times. The recently implemented (RERA) addressed assurance in the level of accountability on real estate builders and developers and infuse transparency in the this sector has been revolutionary in the history of the Indian property sector. For the residential sector in India, the GST will definitely be a positive sentiment booster among property buyers.
Here is why the GST will have a positive effect on the Real Estate Sector in India:
1. Low cost on under construction
GST will lower rate on items like cement, steel etc leading to considerably lower construction costs. This will lower the real estate prices and eventually be a benefit to the common man.
2. Integrated tax system
It is generally crucial in the real estate industry to have a uniform tax base. The builders and developers currently pay tax even on the purchase of their raw materials. GST addresses such issues by making all the taxes uniform.
3. Revenue Neutral Rate (RNR)
The method of tax operation in the real estate sector does not sync between the VAT and service tax laws. Such a problem can be mitigated with the help of GST that would help keep one transaction system – Revenue Neutral Rate (RNR) which is decided by the State Good and Services Tax (SGST) and the Central Goods and Service Tax (CGST) departments.
4. Ease Compliances
With the help of GST, it will be easier to maintain an audit trail for better control and monitoring, and completely benefiting the Indian real estate sector. It will effectively reduce the complexity of compliance bringing in efficiency and smooth transaction.
Overall, the Goods and Service Tax (GST) will have a marginal impact on the real estate sector in the days to come. There will be remarkable improvements in buyer sentiments and change perceptions that buyers have had against this sector. The Developers too will find the GST regime much simpler to work with, with the benefit of input tax credit being an added advantage.