Major Impacts Of GST On Real-Estate That You Must Know

With the GST applicable all over the country as of July 1, the tax system has undergone a major reform. Since it’s a major step, it is going to take a lot of time for the citizens to adapt to the change and get used the new tax system. Nirmal Singh Lotus Green talks about the impacts GST would have on the real estate. 

The government has been claiming that GST is the change that the country needs for a very long time and it would help cut off the cascading tax effect, create a uniform tax rate and structure and help in reducing the additional tax burden on the consumers.

GST is predominantly about ‘One Nation, One Tax’ which means that the tax burden would be equalized and the end consumer will only bear the GST charged  by the last dealer in the supply chair unlike the Value- added tax where the end customer would bear the entire tax burden.

The anti- profiteering clause under section 171 of GST law clearly states that it is mandatory to pass on the benefit tax reduction to the final customer. For residential real estate, GST will prove to be much more beneficial than the earlier tax system. Buying a ready to move in building would be a great investment at this time as there is on implementation of any indirect tax on such kind of purchase. But on the other hand, projects that are still under construction would be in problem and dig a deeper holes in the profit as the tax % has risen up to 12% including the (stamp duty and the registration charges) from the earlier 7-9% (Vat and Service tax combined).

GST is not the only reform that you should worry about before buying or selling of any property now. With the introduction of RERA (Real Estate and Regulation Act) there are many steps that are being taken to ensure the safety of the buyers and ensure much more stability and transparency in the sector.

But Nirmal Singh Lotus Green believes that for the builder and the dealer, GST can prove to be a little harsh. With the ‘no tax burden on the customer’ during the sale of the fully constructed buildings the entire tax burden of 12% would be bore by the builder and the dealer. Plus, what exponents are being considered are not yet known to the builders, which makes it very difficult for them to ascertain how much tax burden would be levied on them and if it would cover the major expenses on the land, material and labour cost.

Nirmal Singh Lotus Green adds “that if we look at the bigger perspective then the implementation if GST has made the calculation of tax much simpler with just one tax initiative, so the burden of paying multiple taxes is definitely no longer a problem bringing much ease in the business now”.