REAL CHANGE - Real impact of GST on realty sector

It is expected that with the implementation of GST (Goods and Service Tax), cost of real estate sector will comparatively reduce and, hence, the benefit of the reduced cost must be passed on to the customer.

However, right now, it is difficult to assess the exact benefit to be passed on to existing or new homebuyers in the absence of any calculation mechanism by GST council.

The reasons is, as per the anti-profiteering clause under the GST law, any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit will be passed on to the recipient by way of reduction in prices.

Thus, it is certain that any benefit accrued to the builder will pass on to the customer.But, more clarity on this is still awaited.

In the current scenario, the potential impact of the GST on the Real estate sector shall be better for the economy and for the real estate in particular as it will bring in more transparency and the things shall become crystal clear as instead of many agencies there would be a single nodal agency which can make the whole process streamlined and properly methodical attracting more FDI.

By abolishing multiple taxation system and levying a single consolidated tax, things would be more clear and transparent with no scope of confusion and no tax to be paid at different stages, at different times. Thus, overall, GST would bring in more transparency by providing an audit trail for better control and monitoring of the real estate sector.

The unified tax system will also stop the side effects of multiple taxation, at different stages which, sometimes, can result in inflated prices for the end users. All indirect taxes, like excise duty, service tax, VAT, entry tax, etc, will be subsumed into GST.

However, taxes like custom duty, road tax, property tax and stamp duty will not be subsumed. The rate of GST as recommended by the GST council is 12% (in case there is composite contract of land and construction).

Currently, no indirect taxes like service tax or VAT are charged on the sale of readyto-move-in property.However, the taxes paid on the advance amount will be eligible to be adjusted with the GST levied on such invoices. In outstanding payment no extra tax, like GST would be charged on receipt of money in respect of demand generated in the current system. On the interest on delayed payments, GST will be charged on interest received from the customer, when the interest is being realized. GST will be charged on such receipt of interest.

Suggested projects : Jaypee Greens Wish Town having various ready to move in projects such as Jaypee Kosmos, Jaypee Klassic, Jaypee Kalypso Court, Imperial Court, Pavilion Court etc.