With the freshness of monsoons in India GST is likely to come into action in Indian economy around end of the April this financial year. Having said that, GST has become one of the longest spoken about tax reforms, that has already been approved by both of the houses of parliament. Now, market is eagerly waiting GST to be finally implemented. Already three states have given stamp of approval and other will go after. Now speaking about its impact on real estate experts have come with some diversified opinions. Here we will try to solve the riddle a bit. But for that we need to have a clear idea about applicable, existing taxes on residential real estate.
Service Tax– If you are a potential buyer and you want to buy flats in Kolkata this year then must be aware of these basic taxing terms. While investing in an under construction property, developer will ask for service tax from you. This tax was out of transactions till 2010. But now government has already defined the importance of service tax. To make it uncomplicated government has given abatement of 3/4th of cost of unit as land and raw materials for construction and only 1/4th of the cost of unit is calculated as service. For this reason at the moment most homebuyers are paying 3.75% of cost of unit as service tax (1/4th of 15%).
VAT (Value added tax)-Again for under-construction properties you will have to pay additional VAT in states like – Karnataka, Haryana and Maharashtra. Yet there many states who don’t charge VAT. For calculating exact VAT percentage and not use composition scheme, developers will have to uphold proper accounts of purchased construction materials and VAT paid by them for the same to acquire key in credits which is weighty and makes it tough for buyers to identify with.
Stamp Duty– Stamp duty has been charged by the state governments. Thus, it’s a variable tax amount depending on state that has been charged for registration of sale agreement for realty transactions. While we’re on the subject in case you are purchasing a ready to move-in property directly from developer after he has obtained completion certificate from authority, you don’t need to pay service tax and VAT, and so saving 3.75% to 9% of property cost depending on state where you are purchasing your property.
GST will impact these three taxes and how that’s the subject we are discussing about. Service Tax and Vat will be replace by central GST and stamp duty will unchanged as it falls under state’s financial jurisdiction.
It’s not that easy to predict GST impact on real estate. We are more likely to believe that post GST implementation the price of under- construction residential units will be going to have a hike. It will blow up persistently flat realty sale eminently. People belong to real estate industry need to straight away engage with government to play down this impact by expounding position on works agreement, composition scheme and already paid service tax and VAT by developers on under developed property.
– By SD Group Kolkata