Will Buyers Get A Better Deal on Properties Post GST?
Jun 28, 2017 Real Estate News
From 1st July, the most game changing taxing law is going to roll out. Uniform tax across the real estate will not be a dream anymore. Over 25 states have passed out the GST rates applicable in the states. We all are aware of what GST holds for a developer, but do we really know what GST holds for a buyer?
We discuss it for you here:
Will the property prices get affected?
This is most common question that most buyers need an answer for. There is a difference in opinion among the experts over the question. But one thing is for sure, for the properties brought before GST, the service tax charged will be 4.5 percent and a value added tax of 1.05 percent whereas after GST the buyer will have to pay the service tax of 12 percent. This will surely increase the price of the properties.
There are provisions in the GST outline that the developers can use the benefit of input tax credit. This means that the developer can change the tax rate to his advantage. For example, the present excise tax on steel is 12.5 percent and vat is 4 percent, after GST it will be uniform 18%. Similarly, the services were taxed at 15 percent, under GST they will be taxed at 18 percent. The service tax for construction is 4.5 percent and the VAT is around 1 to 2 percent, after GST it will be 12 percent uniformly.
The developer can avail the input tax credits on bills. This is why buyers are hoping that they will be able to get a better deal by negotiation discounts and cuts. However, in short run, the buyers will not be able to avail the discounts as the developer needs to fulfil certain conditions to avail the ‘credit’. The developer needs to show the invoice of goods and service, tax invoice, proof of payment of tax by the supplier, furnishing IT returns and the payment must be made within 180 days to the vendor.
How does existing buyer benefit from it?
It is important to understand that the property prices do not solely depend on the GST, there are many other factors depending on it. For a smaller construction, the goods and services required will be less and thus the prices will be too. But in case of high end or luxury segment, the cost of service and goods will be higher.
There aren’t any short run benefits for the buyers in real estate as it will take developers some time to fulfil all the criteria. But there won’t be any further burden on the buyer's post GST.
Benefit on the resale properties:
GST does not apply for completed or resale properties. But the stamp duty will remain and there won’t be any service tax or VAT. This is good news for the buyers who are hoping to buy a resale property, as a buyer saves up to 9 percent on the said property.
We discuss it for you here:
Will the property prices get affected?
This is most common question that most buyers need an answer for. There is a difference in opinion among the experts over the question. But one thing is for sure, for the properties brought before GST, the service tax charged will be 4.5 percent and a value added tax of 1.05 percent whereas after GST the buyer will have to pay the service tax of 12 percent. This will surely increase the price of the properties.
There are provisions in the GST outline that the developers can use the benefit of input tax credit. This means that the developer can change the tax rate to his advantage. For example, the present excise tax on steel is 12.5 percent and vat is 4 percent, after GST it will be uniform 18%. Similarly, the services were taxed at 15 percent, under GST they will be taxed at 18 percent. The service tax for construction is 4.5 percent and the VAT is around 1 to 2 percent, after GST it will be 12 percent uniformly.
The developer can avail the input tax credits on bills. This is why buyers are hoping that they will be able to get a better deal by negotiation discounts and cuts. However, in short run, the buyers will not be able to avail the discounts as the developer needs to fulfil certain conditions to avail the ‘credit’. The developer needs to show the invoice of goods and service, tax invoice, proof of payment of tax by the supplier, furnishing IT returns and the payment must be made within 180 days to the vendor.
How does existing buyer benefit from it?
It is important to understand that the property prices do not solely depend on the GST, there are many other factors depending on it. For a smaller construction, the goods and services required will be less and thus the prices will be too. But in case of high end or luxury segment, the cost of service and goods will be higher.
There aren’t any short run benefits for the buyers in real estate as it will take developers some time to fulfil all the criteria. But there won’t be any further burden on the buyer's post GST.
Benefit on the resale properties:
GST does not apply for completed or resale properties. But the stamp duty will remain and there won’t be any service tax or VAT. This is good news for the buyers who are hoping to buy a resale property, as a buyer saves up to 9 percent on the said property.
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