GST on Real
Estate: 8 Ways It Could Impact Plot Buyers
GST basically is an indirect tax regime which has subsumed all the other levies charged on the sale of any goods or services in India. In the awe of GST, many experts have shed their views about the impact of this new tax law on the country’s economy. Every sector will be affected in some way or another. However, GST will have a somewhat neutral influence over the real estate industry according to various economists. Still, we have to wait for a couple of financial cycles to check the theories.
Some of these theories showing the impact of GST on real estate are scribbled below:
1. New Tax Rates:
A four-tiered tax structure has been suggested with a tax percentage of 5, 12, 18, and 28 percent. Under the revised GST order, the tax rate applicable on under construction property is settled on 18 percent with 9 percent CGST and 9 percent SGST. However, the government has reduced the land value equal to one-third of what the developers charge. Hence, the billable rate will be set at 12 percent.
The stamp duty and registration charges are not in bounds of the GST regime but are expected to soon be incorporated in the same.
2. Preference for Ready to move in Properties:
Ready to move in properties will be preferred more now, as it's out of the taxes reach. So, residential plots in Indore for sale will be preferred more now. Nevertheless, these properties will now be a little high on price due to the lack of any input tax credit.
3. Impact of GST on Home Loans:
The core cost of any home loan is the interest payment. The interest cost on the loan will not change as there is no GST of any kind or service tax on it. As GST has no intervention in stamp duties, any stamp duty charged on the loan documentation will also remain neutral.
As GST is wrapped in the light of transaction transparency, a cleaner business environment is expected now. From an investor's point of view, the prices are more likely to drop by 1 to 3 percent.
5. Impact over Selling a Property:
GST is not applicable on the resale of property it has acquired an occupational certification, so if a person has plots in Indore and holds an occupational certificate he is not entitled to any GST payment. The stamp duty and registration charges are still needed to be paid.
6. Impact on Luxury Housing:
The luxury housing prices are expected to rise as they have a larger housing value, and input credit alone cannot bring the price down. On the other hand, houses of low-cost won’t have any ill effects.
An array of construction materials is set up on 28 percent, so the cost of various fitting will make the prices go up. Ceramic articles, tiles, granites etc., products will face 28 percent tax.
8. Status of resale property and land:
As GST is not applicable on the resale property, hence 12 percent is not billable here. Still, the stamp duty and registration have to be paid. Although, its impact won’t be too much as the price for under-construction and completed properties differ. If a person has a constructed plot in Indore for sale he won’t have to pay the 12 percent GST.