Goods and Service Tax (GST) was one of the longest awaited tax reforms in the country. The GST bill, which got unanimous approval of both the houses of parliament, was finally passed in the Rajya Sabha during the first week of August 2016.
While three states have already ratified the bill, the other states will be following the trend quite soon, and by April 2017, the GST is expected to roll out completely across the country. When implemented, this new bill will replace various taxes like Value-Added Tax, Excise Duty Tax, Service Tax, etc. by a single tax – the GST.
It is expected that the GST is going to be beneficial for homebuyers as well as for the real estate developers. To know more on how GST will impact the real estate sector, read on!
- GST unifies the various taxes into one:
One of the biggest challenges that the real estate sector faces is the management of the multiple indirect tax levies. With the GST Bill in place, apart from the stamp duty, every other tax that’s related to goods and services will be eliminated, and the real estate developers need to pay just one tax. Thus, the tax compliance process will be more streamlined and simplified going forward.
- Compliance and input costs will diminish:
In India, there are more than 17 indirect taxes when it comes to the real estate sector. When GST comes into practice, these taxes, which even include the compliance and input costs, will diminish entirely. It remains to be seen what the rate of GST will be, based on which increase or decrease in nett cost can be determined.
- Overall price of construction materials will reduce:
Right now, the real estate developers are paying taxes for each material that they procure. Therefore, the overall cost of the construction materials is quite high. Since GST will eliminate the heavy taxed levied on each and every goods or services related to construction, the cost of building materials will reduce. Thus, we can expect that there will be more reduction in input cost and the final price of real estate properties.
- Government’s revenue will increase:
Since the taxing policy in the real estate sector will be equalised with the help of GST tax, tax compliance among real estate developers is bound to be simpler and easier to track. In other terms, GST regulates the tax structure across India. It is also anticipated that GST will bring a substantial boost to the economy. The economic boost will have a positive effect on the real estate sector because if the economy does well, the demand for real estate will also increase.
- Transfer of goods across states will be easier now:
As we know, the GST bill will eliminate multiple taxes and replace it with a single tax. Since there will be no need for the real estate developers to pay additional tax during the transfer of construction materials, they can procure construction goods from other states without spending a lot on the taxes.
In simple terms, centralised warehouses can now supply goods to builders across the country at a nominal pricing without additional taxes.
To yield the best benefits out of this new bill for their sector, real estate developers must prepare themselves in all possible ways. Also, there are frequent meets at the GST council to discuss the uniform tax rates that would be levied on various kinds of goods and services.
While the new GST bill currently seems to be highly beneficial to the real estate sector and, in turn, to the homebuyers, one must wait until the final GST rates are out to decide on how magnificent these benefits can be.
Since the government is expecting to implement the GST bill by April 2017, we might be able to know about the overall benefits and the positive impact of GST on the economy as well as on the real estate sector by then.