7 things about GST on property that everyone should know
Jul 25, 2017 Real Estate News
Goods and Service Tax is expected to bring a structured taxing system to the country eliminating the complex and ambiguous one that is currently ruling the country. GST is a reference to the most revolutionary taxing system since the independence.
GST is expected to make the taxing system seamless across the country with the well defined structure. The Union government has fixed the GST on the under construction properties of the real estate sector at 18 percent with the full input tax credit (ITC) excluding the cost of land.
Here are seven things about GST on real estate sector that everyone should know:
1. Real estate to be taxed at 18 percent:
The under construction properties will be taxed at 18 percent which includes 9 percent CGST and 9 percent SGST. The government has allowed the deduction of land value equivalent to one third of the total amount charged by the developer which has made the effective rate of 12 percent. However, the quantum of ITC will be higher although the overflow of credit is restricted. The property is priced based on the demand and supply and not the taxes alone. Imposing GST on land will lead to the rising of land prices. The government is not too keen on doing so because then the affordable housing will become expensive.
2. Stamp duty and property tax to be subsumed later:
Stamp duty and registration charges are now outside the scope of GST but the government plans to include it in the new tax regime later. The stamp duty and registration charges are levied by the state and it differs from state to state. Hence, the government wants to work out its way to it slowly.
3. Detailed tax need not be filed this year:
According to the government, the traders and businessmen need not file the detailed return of the taxes just the summary of the return will suffice.
4. Inevitable teething issues:
Inflationary pressure, teething issues, and certain short impact will make the compliance difficult for first 12- 15 months. But the global precedence says that GST has been beneficial for them.
5. Easier redressal of taxation issues:
Post GST the taxing will become easier and uniform as there will be no overlapping jurisdiction between centre and state. The same taxing structure will be applicable to everyone. However, issues related to classification, composite and mixed supplies, ITC etc can crop up.
6. The transition period can be a pain for developer and consumer:
After GST, the main issue will be the pricing of the commodities, how will be priced? How will the developers price their inventory? It will take three to six months to get the ITC details and get the actual price of the commodity.
7. Unregistered vendors will be a headache:
Unlike the past, the GST has been shifted from the provider to the receiver, if that person happens to be a registered person. Buying the property from an unregistered vendor will attract a reverse charge on the receipt which adds to the compliance cost of the purchaser.
GST is expected to make the taxing system seamless across the country with the well defined structure. The Union government has fixed the GST on the under construction properties of the real estate sector at 18 percent with the full input tax credit (ITC) excluding the cost of land.
Here are seven things about GST on real estate sector that everyone should know:
1. Real estate to be taxed at 18 percent:
The under construction properties will be taxed at 18 percent which includes 9 percent CGST and 9 percent SGST. The government has allowed the deduction of land value equivalent to one third of the total amount charged by the developer which has made the effective rate of 12 percent. However, the quantum of ITC will be higher although the overflow of credit is restricted. The property is priced based on the demand and supply and not the taxes alone. Imposing GST on land will lead to the rising of land prices. The government is not too keen on doing so because then the affordable housing will become expensive.
2. Stamp duty and property tax to be subsumed later:
Stamp duty and registration charges are now outside the scope of GST but the government plans to include it in the new tax regime later. The stamp duty and registration charges are levied by the state and it differs from state to state. Hence, the government wants to work out its way to it slowly.
3. Detailed tax need not be filed this year:
According to the government, the traders and businessmen need not file the detailed return of the taxes just the summary of the return will suffice.
4. Inevitable teething issues:
Inflationary pressure, teething issues, and certain short impact will make the compliance difficult for first 12- 15 months. But the global precedence says that GST has been beneficial for them.
5. Easier redressal of taxation issues:
Post GST the taxing will become easier and uniform as there will be no overlapping jurisdiction between centre and state. The same taxing structure will be applicable to everyone. However, issues related to classification, composite and mixed supplies, ITC etc can crop up.
6. The transition period can be a pain for developer and consumer:
After GST, the main issue will be the pricing of the commodities, how will be priced? How will the developers price their inventory? It will take three to six months to get the ITC details and get the actual price of the commodity.
7. Unregistered vendors will be a headache:
Unlike the past, the GST has been shifted from the provider to the receiver, if that person happens to be a registered person. Buying the property from an unregistered vendor will attract a reverse charge on the receipt which adds to the compliance cost of the purchaser.
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