Impact of GST on Real Estate
Apr 04, 2017 Real Estate News
According to the rating agency ICRA, real estate will attract 18% of GST rate and its impact on the housing prices will remain neutral.
In the recent Goods and Service Tax (GST) meeting, the finance ministry proposed a four tier GST structure. A lower rate of 6%, a standard rate of 12% and 18% and a higher rate of 26% on goods was concluded. Services like work contracts are expected to fall under the 18% slab. ICRA expects that this will not increase the prices of real estate steeply, but there will be slight variation in prices due to different taxation practices in states.
ICRA also stated that the 18% GST will be higher than the current VAT and service tax of the property under construction.
According to the current tax regime, taxes paid by the developers like excise tax and CST for the raw materials, cannot be offset against the indirect taxes collected from the buyers. GST will provide a better control and these taxes can be utilized in a better way, lowering the cost of project.
Broadly the GST will impact the end users in a minor way. In states like Karnataka, the end user could expect some savings in the final cost whereas in the states like Haryana and Maharashtra, end users could see a slight hike in prices.
The indirect taxes in the real estate are excise duty, service tax and value added tax (VAT). These will be classified under GST under the new indirect tax regime.
Since states have different indirect taxation method, the impact will vary from state to state.
It has been clarified that the construction or the work contract will fall under the supply of service, bringing the uniformity in the indirect tax structure across the states.
The developers will pay the GST for the labour, work, materials will be taken as the input credit nd the offset with the GST will be payable by the end consumer.
GST is a step towards the harmonisation of the tax structure and method across the states and improve the ease of business for the companies.
In the recent Goods and Service Tax (GST) meeting, the finance ministry proposed a four tier GST structure. A lower rate of 6%, a standard rate of 12% and 18% and a higher rate of 26% on goods was concluded. Services like work contracts are expected to fall under the 18% slab. ICRA expects that this will not increase the prices of real estate steeply, but there will be slight variation in prices due to different taxation practices in states.
ICRA also stated that the 18% GST will be higher than the current VAT and service tax of the property under construction.
According to the current tax regime, taxes paid by the developers like excise tax and CST for the raw materials, cannot be offset against the indirect taxes collected from the buyers. GST will provide a better control and these taxes can be utilized in a better way, lowering the cost of project.
Broadly the GST will impact the end users in a minor way. In states like Karnataka, the end user could expect some savings in the final cost whereas in the states like Haryana and Maharashtra, end users could see a slight hike in prices.
The indirect taxes in the real estate are excise duty, service tax and value added tax (VAT). These will be classified under GST under the new indirect tax regime.
Since states have different indirect taxation method, the impact will vary from state to state.
It has been clarified that the construction or the work contract will fall under the supply of service, bringing the uniformity in the indirect tax structure across the states.
The developers will pay the GST for the labour, work, materials will be taken as the input credit nd the offset with the GST will be payable by the end consumer.
GST is a step towards the harmonisation of the tax structure and method across the states and improve the ease of business for the companies.
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