Will the Construction Cost And Property Process Come Down After GST?
Jul 17, 2017 Real Estate News
The GST has been regarded as a revolutionary tax reform for the country. The new tax regime gives the provision to the developers to pass on the benefit input tax credit to the buyer. It is believed that the buyers will be able to save some money with the final cost of the purchase.
The idea behind input tax credit is not very clear and there are some disputes over it. The application of GST and its implication is yet to be understood. The buyer can only be at the profit if the deal is flawless. There are still a lot of unanswered questions regarding it and it is too soon to say about anything regarding it. The price of the product and services are low as compared to the cost of the land.
Let's, for example, say, that the cost of the property is Rs 3000 sq ft, then the cost of construction comes to be nearby Rs 800- 1000. The rest is the land price and stamp duty etc. While GST may bring down some prices, others might go up due to compliances and business cost. If there’s a lull between them then they won’t move forwards and money won’t come in.
There are few ‘artificial bottlenecks’ that have been created.
Will prices go up?
Property surveys and tracking systems have been trying to find out the mindset of the potential buyers. The buyers are confused about the system too and are contemplating whether buying it is a good move at this time or not. Some of them are claiming that the GST was introduced too soon after RERA. There should have been some time so that the buyers could have had a chance to think more carefully about it.
If the prices don’t go down then the developers will have to sell their unsold inventory at throwaway prices. This is an unlikely situation. As the tax on the services is now higher, the net prices may rise.
Input tax credit is time taking:
It won’t be easy for the buyers to get the benefit of the input tax credit. Unless the buyer is willing to give the profit to the buyer from his own pocket, the credit system will not be able to help the end consumer.
List of things you need to fulfil to avail the benefit:
Possession of tax invoice
Receipt of goods and services
Payment of tax by supplier
Furnishing of returns
Payment to be made for value and tax within 180 days.
While filing the tax return the developer has to upload the details of outward supplies of goods and services, the supplier has to upload the details on outward supplies of the goods, and the buyer has to upload the details of the TDS on the payment made. The developer also has to upload the details of input tax credit. The data will be validated and it will clearly take some time to pass the benefit to the buyers.
The idea behind input tax credit is not very clear and there are some disputes over it. The application of GST and its implication is yet to be understood. The buyer can only be at the profit if the deal is flawless. There are still a lot of unanswered questions regarding it and it is too soon to say about anything regarding it. The price of the product and services are low as compared to the cost of the land.
Let's, for example, say, that the cost of the property is Rs 3000 sq ft, then the cost of construction comes to be nearby Rs 800- 1000. The rest is the land price and stamp duty etc. While GST may bring down some prices, others might go up due to compliances and business cost. If there’s a lull between them then they won’t move forwards and money won’t come in.
There are few ‘artificial bottlenecks’ that have been created.
Will prices go up?
Property surveys and tracking systems have been trying to find out the mindset of the potential buyers. The buyers are confused about the system too and are contemplating whether buying it is a good move at this time or not. Some of them are claiming that the GST was introduced too soon after RERA. There should have been some time so that the buyers could have had a chance to think more carefully about it.
If the prices don’t go down then the developers will have to sell their unsold inventory at throwaway prices. This is an unlikely situation. As the tax on the services is now higher, the net prices may rise.
Input tax credit is time taking:
It won’t be easy for the buyers to get the benefit of the input tax credit. Unless the buyer is willing to give the profit to the buyer from his own pocket, the credit system will not be able to help the end consumer.
List of things you need to fulfil to avail the benefit:
Possession of tax invoice
Receipt of goods and services
Payment of tax by supplier
Furnishing of returns
Payment to be made for value and tax within 180 days.
While filing the tax return the developer has to upload the details of outward supplies of goods and services, the supplier has to upload the details on outward supplies of the goods, and the buyer has to upload the details of the TDS on the payment made. The developer also has to upload the details of input tax credit. The data will be validated and it will clearly take some time to pass the benefit to the buyers.
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