In recent years, not just in Tier 1 urban regions but also in Tier 2 and Tier 3 urban neighborhoods and villages, real estate in India has seen tremendous growth. With measures like RERA, the industry is on the verge of more controls.
Another improvement that will have a significant impact on this market is the GST. The real estate business is estimated to account for roughly 5% of India’s GDP and is also one of the country’s largest employers.
Impact on buyers
Under the former tax scheme, buyers of properties under construction had to pay Value Added Taxes(VAT), Service Tax, Registration Fees, and Stamp duty. Furthermore, because governments charged Value Added Taxes, registration fees, and stamp duty, property prices varied from one state to the next.
Construction properties are subject to a single tax rate of 12 percent under the GST. Completion or ready-to-sell residences are not subject to the tax, unlike in the past. As a result, buyers will benefit from the GST price reductions.
Impact on Developers
Developers previously had to pay Excise duty, VAT, Customs duty, Entry taxes, and other taxes on raw materials and inputs and Service tax on various input services such as approval fees, architect professional fees, labor costs, and legal fees.
Due to the subsumption of many taxes and the availability of input tax credit, developers’ construction costs are significantly reduced under GST. On the downside, developers must do several calculations to arrive at ITC, which they must then pass to buyers. As a result, they can typically only give to the ITC during the final stages of the process.
Impact on stakeholders
The tax paid on various commodities and services determines the influence on linked services such as labor, material suppliers, and service providers. It will have an impact on the entire real estate business.
For example, cement was previously taxed at 27-31% but is now taxed at 18%. A reduction in cement costs will result in a reduction in overall construction expenses.
Overall, compared to many indirect taxes, the GST impact on real estate sector would be lower. Developers, dealers, and manufacturers will benefit from easy taxation and documentation as a result of this. To know more format for the consent letter for gst, click here. The establishment of a single source of taxes would reign in inflated property values caused by double taxing, which would have a cascade effect. It would also lessen instances of unethical transactions, which have long plagued the industry.