After RERA Act, it is the GST that promises to standardize the real estate sector. At present a home buyer has to several indirect taxes to buy a home like excise duty, value-added tax and service tax. All this amounts to 11% and does not include stamp duty.
With GST, all these taxes have been subsumed and the buyer will now have to pay 12% tax for purchase of any property, excluding stamp duty. However this only stands true for underconstruction properties and not on completed ready-to-move-in apartments homes. While the entire input credit — excise duty and Central sales tax on construction materials that are paid by developers — will also be allowed unlike earlier.
The government made a statement, “The builders are expected to pass on the benefits of lower tax burden under the GST regime to the buyers of property by way of reduced prices/installments … It is advised to all builders/construction companies that in the flats under construction, they should not ask customers to pay a higher tax rate on installments to be received after imposition of GST.”
According to E&Y report from 2015, the real estate sector accounts for 5% India’s GDP, making it the second largest employer in India. However the industry faces many issues like macro-economy conditions and fiscal policies. One such challenge was the multiple indirect taxes levied by each state such as VAT, Stamp duty, Service tax, registration fees and so on.
GST simplifies tax compliance and eliminates the chances of double taxation. Thus giving home buyers a candid reason to cheer up even though the standard GST tax rate is slightly higher. Since with GST it is expected that cost of projects will fall for developers, it would mean cheaper homes for consumers too. For builders the actual tax effect will lower due to the input tax credit on raw materials than the present taxes.
Builders at present are scaring customers of the price hike since they can’t claim any tax credit for taxes paid before July 1. The amount of tax that a property buyer will have to bear depends on his property. If you are moving in a ready home or if your under construction property is almost ready and have paid 90 to 95% price, you will have to pay flat 12% tax on the remaining amount. However if you have just bought an under-construction unit that costs 1 crore and just paid 20 lakhs of it then the remaining 80 lakhs will invite 12% GST tax.
Hence given the current scenario it makes perfect sense to invest in a ready-to-move RERA compliant home which is 12% GST free and you can save up to 39 lakhs with Mayfair Housing