Impact of GST on Housing
Jul 14, 2017 Real Estate News
Currently, the builders have to pay the following taxes:
These taxes when accumulated sums up to a huge amount which the customers have to pay while buying the house. However, after the implementation of GST, the buyers will have to a single Goods and Service tax. This rate has been fixed at 12 percent for under construction and new projects. Although at the present service tax is 4.5 percent, but that is exclusive of other taxes that are mentioned above.
GST would be advantageous for the builders as well because they will get input tax credit for the material he uses in construction. And thanks to the anti-profiteering law, this reduced tax liability of the builders would be reflected in the price of the houses, thus benefit the customers.
Moreover, the builders can claim a refund for the tax that has already been paid. In exchange, they can pay 12 percent GST rate in order to subsume multiple taxes. This would result in housing prices coming down further.
Application of GST on under construction and completed houses
Still, it is difficult to say whether under construction houses would cost more to the home buyers. To a great extent that depends on the degree of completion of projects and the kind of raw material used after GST is implemented.
However, as per the information acquired from reliable sources, buyers of under-construction projects will be taxed at 12 percent on that portion of work that is completed after July 1. But the buyers should realise that it is directly related to the input tax credits on their purchases of goods and services which are used after July 1 by the builders. So the builders should not illegally pressurise the buyers to make undue payments in order to escape GST. The buyers should only pay according to the preconditioned slab. For the projects that have already been completed, the buyers are recommended to take buying decision based on their requirements. If they are getting a good deal based on the price before July 1, they should go ahead with their decision of buying the property.
Maintenance Costs of Housing Societies
At present, the service tax levied on maintenance charge is 15 percent. After GST kicks in, the same would spike to 18 percent. And if you are paying a monthly maintenance charge of Rs. 5000 and more, you might have to pay even higher after GST. But the owners of the houses in the residential complex must be aware of the fact that: only if the residential welfare association or a co-operative housing society collects more than Rs 20 lakh per year and more than Rs 5,000 per apartment per month, they are liable to pay maintenance charges as per the rate of GST.
House Rent
People who are currently living in rented houses are exempted from GST much like the present format where they were excused from service tax.
- 12.5 percent on raw material and excise
- 12.5-14.5 percent VAT on construction material
- Entry tax levy in different states
- 4.5 percent Service tax on construction
- 1-2 percent VAT under composition scheme
These taxes when accumulated sums up to a huge amount which the customers have to pay while buying the house. However, after the implementation of GST, the buyers will have to a single Goods and Service tax. This rate has been fixed at 12 percent for under construction and new projects. Although at the present service tax is 4.5 percent, but that is exclusive of other taxes that are mentioned above.
GST would be advantageous for the builders as well because they will get input tax credit for the material he uses in construction. And thanks to the anti-profiteering law, this reduced tax liability of the builders would be reflected in the price of the houses, thus benefit the customers.
Moreover, the builders can claim a refund for the tax that has already been paid. In exchange, they can pay 12 percent GST rate in order to subsume multiple taxes. This would result in housing prices coming down further.
Application of GST on under construction and completed houses
Still, it is difficult to say whether under construction houses would cost more to the home buyers. To a great extent that depends on the degree of completion of projects and the kind of raw material used after GST is implemented.
However, as per the information acquired from reliable sources, buyers of under-construction projects will be taxed at 12 percent on that portion of work that is completed after July 1. But the buyers should realise that it is directly related to the input tax credits on their purchases of goods and services which are used after July 1 by the builders. So the builders should not illegally pressurise the buyers to make undue payments in order to escape GST. The buyers should only pay according to the preconditioned slab. For the projects that have already been completed, the buyers are recommended to take buying decision based on their requirements. If they are getting a good deal based on the price before July 1, they should go ahead with their decision of buying the property.
Maintenance Costs of Housing Societies
At present, the service tax levied on maintenance charge is 15 percent. After GST kicks in, the same would spike to 18 percent. And if you are paying a monthly maintenance charge of Rs. 5000 and more, you might have to pay even higher after GST. But the owners of the houses in the residential complex must be aware of the fact that: only if the residential welfare association or a co-operative housing society collects more than Rs 20 lakh per year and more than Rs 5,000 per apartment per month, they are liable to pay maintenance charges as per the rate of GST.
House Rent
People who are currently living in rented houses are exempted from GST much like the present format where they were excused from service tax.
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