GST Might Boost Some Segments of the Real Estate Market
Jul 06, 2017 Real Estate News
GST is the largest tax reform India had seen since independence. The concept of using tax credit makes GST distinct. It is set to eliminate the incidences of cascading taxes or tax on tax paid at different stages in the supply chain.
In the affordable housing sector, GST is expected to keep the prices low, while it might affect in a price hike in other sectors. All the major players in the real estate market focus on the middle and high income customers. It is only recently that the focus is slightly shifting towards the low income segment, which is high in volume.
As the industry is still assessing the impact of GST on the market, its effect can still not be predicted. But the tax credit benefit has the potential to reduce the costs.
However, this tax credit system can be effective only if all the parties in the value chain are covered under GST. For example, some of the building material like river sand is procured from the unorganised sector by the builders. For providers of material, the composition scheme can be retained. But it will be withdrawn from the developers.
The collection of GST has been planned through a new regime. Considerable changes will be made in the tax audit and quality control protocols to make sure that the advantages low cost are not inappropriately misused in other segments.
It was expected that GST would subsume the stamp duty that is implied on a purchase. But the new tax regime has not lessened the burden of stamp duty. The only relief seen is the expected reduction in prices, which would, in turn, reduce the stamp duty as a percentage of the property price.
Some segments of real estate such as warehouses and logistics facilities that enable transportation of goods between states are expected to benefit from GST. It is anticipated that GST will have a positive impact on this segment.
The tax rates on goods varied among states in the earlier regime. Thus the warehouse facilities located in the low tax area were more viable. This would change as the new system equalises the rate of tax.
It can be concluded that the GST in itself is not a solution to the problems faced by the real estate sector. Policy and management reforms are required do that the benefits of GST can be reaped by the buyers and sellers in the real estate market
In the affordable housing sector, GST is expected to keep the prices low, while it might affect in a price hike in other sectors. All the major players in the real estate market focus on the middle and high income customers. It is only recently that the focus is slightly shifting towards the low income segment, which is high in volume.
As the industry is still assessing the impact of GST on the market, its effect can still not be predicted. But the tax credit benefit has the potential to reduce the costs.
However, this tax credit system can be effective only if all the parties in the value chain are covered under GST. For example, some of the building material like river sand is procured from the unorganised sector by the builders. For providers of material, the composition scheme can be retained. But it will be withdrawn from the developers.
The collection of GST has been planned through a new regime. Considerable changes will be made in the tax audit and quality control protocols to make sure that the advantages low cost are not inappropriately misused in other segments.
It was expected that GST would subsume the stamp duty that is implied on a purchase. But the new tax regime has not lessened the burden of stamp duty. The only relief seen is the expected reduction in prices, which would, in turn, reduce the stamp duty as a percentage of the property price.
Some segments of real estate such as warehouses and logistics facilities that enable transportation of goods between states are expected to benefit from GST. It is anticipated that GST will have a positive impact on this segment.
The tax rates on goods varied among states in the earlier regime. Thus the warehouse facilities located in the low tax area were more viable. This would change as the new system equalises the rate of tax.
It can be concluded that the GST in itself is not a solution to the problems faced by the real estate sector. Policy and management reforms are required do that the benefits of GST can be reaped by the buyers and sellers in the real estate market
