With 4 crucial bills on GST being passed in the Lok Sabha on March 29, 2017, it’s now a certainty that the GST would be implemented from July 1, 2017. The GST is being touted as the game changer as it would replace several taxes, cesses and surcharges at one go. The realty market is expecting to benefit from the GST rollout, in a major way. Incidentally, the real estate sector will come under the GST ambit within one year of its roll-out
Anshuman Magazine, chairman, India and South East Asia, CBRE explained that “With the passage of India’s biggest tax reform in decades, we will become a unified market, with one tax for all goods and Services. Once implemented, GST will significantly ease the ambiguity around our taxation system, promote ease of doing business, encourage more Foreign Direct Investment and stimulate overall growth of the economy.”
Positive impact on the taxes
Experts believe that in the present tax system, there are a lot of different taxes that one has to pay, like the VAT, octroi or the local body taxes. GST will subsume all these taxes into it. Diipesh Bhagtani, Chairman-Exhibition, CREDAI-MCHI, explains how “Instead of paying various taxes, at various states and cities, we would soon have just one tax, that is going to benefit us. So, in this process, a lot of labour will be saved, along with large sums of money. Also, we look at taxes to be in line with the standard of the absorption of the industry. We as an industry, who have been suffering from excess of taxes, which in sum, amounts to 40%; if all that can be reduced then it’s a big advantage to all of us.”
Ambiguity on how will GST impact real estate industry
According to experts, there still exists some ambiguity about to the overall impact of the GST on real estate, as per the recent announcements based on the legislations introduced for approval in the Lok Sabha March 29, 2017.
While questioning the new setup, Shubikha Bilkha, Business Head at The Real Estate Management Institute (REMI) says, “The overall impact is still to be assessed and a few questions come to mind. As the government promotes a cashless economy that encourages the purchase of properties using institutional/bank finance, how then does the GST on EMIs for under-construction impact the home-buyer? Furthermore, with REITs slated to bring the much-required additional liquidity into the real estate sector, how does the GST on leasing/renting within a REIT impact the overall ROI for investors.”
Will homes cost more for home buyers post GST?
The latest version of the GST bill states that the leasing of a building, in part or whole which includes a residential and commercial building, would be considered as service rendered as per the GST bill. At present, service tax is only levied on the commercial and industrial units which are rented out but the residential unit is exempt from such taxes. “Service tax and VAT will be replaced by the Central GST and State GST whereas, stamp duty will remain unchanged as it is out of the purview of GST. Two aspects that will define the impact of GST on the sector, is the rate and abatement for land value in total agreement value of residential and under- construction homes” points out Amit Wadhwani, director, Sai Estate Consultants.
Experts believe that lowering costs on account of input credit allowance could lower prices, if developers are willing to pass on the benefits to the end-users, resulting in a saving of up to 20% for the home buyer. Overall, with the implementation of the GST, the consumers may need to bear slightly higher taxes but they could still pay lower prices for the property if the developers pass the benefits of input credits, to their customers.
|GST’s impact on the realty sector|