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Planning to buy a house? You win some, lose some in GST
NEW DELHI: If you are looking to buy a house in the coming years, the implementation of the Goods and Services Tax (GST) will have a dual impact on you — it will
NEW DELHI: If you are looking to buy a house in the coming years, the implementation of the Goods and Services Tax (GST) will have a dual impact on you — it will remove the cascading, double taxation in the system, but will instead levy a higher service charge.
The Rayja Sabha on Wednesday passed the 122nd Constitution Amendment Bill, paving the way for GST’s rollout.
The one-tax regime, according to experts, will rescue consumers from the hassle of paying various state taxes at different levels, thereby doing away with the double taxation impact.
However, the service charge levied on the purchase of the property is likely to push costs up — today, one pays 15%. The proposed rates are likely to be more on services.
“GST will increase the overall cost of under-construction property for buyers if the rate is higher than the current applicable service tax rate of 15%. For states where VAT is not applicable, state GST will be levied. If the rate is lower than 15%, GST can result in lower price for consumers,” said Ankur Dhawan, chief business officer of PropTiger, a real estate portal.
Since developers are the ones who mostly pay for the indirect taxes, a likely reduction makes a straight case for them to pass on the benefit to consumers.
“GST is likely to be a game-changer for the real estate industry… (it) is currently facing issues of multiple taxation, which amounts to over 25% in indirect taxes,” said Brotin Banerjee, MD and CEO, Tata Housing. “Developers will have free input credits on GST paid for services and goods purchased by them, which will reduce costs and can be passed as reduction to buyers.”
“At present, in the case of buying an under-construction flat, one needs to pay both service tax (4.5%) and VAT (varies from state to state). Additional indirect taxes are paid by the developer during procurement, which get built into the cost of the apartment,” said Anuj Puri chairman and country head, JLL India. “Stamp duty, payable on property transfers, is not going to be subsumed into GST.”
The direct impact of GST on real estate, in terms of tax outflow for developers and consumers, will depend on whether the final rate is higher or lower than the current rate.
Whether home purchases become costlier or cheaper will finally depend on the rate in the fineprint of the bill, once it is cleared by the GST Council.
