The government agreed to lower the Goods and Services Tax (GST) on under-construction affordable homes under 60 square meters to 8 percent from 12 percent, Rajiv Talwar, chairman of National Real Estate Development Council, told reporters.
Real estate companies have been pitching for a lower rate across the board. In a meeting with Ministry Of Finance officials, they demanded a 6 percent GST on all under-construction homes, Talwar, said. And input tax credit should continue, he mentioned.
Homebuyers currently pay 12 percent GST in addition to stamp duty and registration levied by states.
If the Government of India reduces GST on Real Estate from 12 percent to 6 percent, a new slab of 6 percent will have to be created, said Abhishek Jain, indirect tax partner at EY India told BloombergQuint. “For the 6 percentage-point reduction, they will have to think through the revenue implication if they wish to go ahead with this change.”
No GST is levied on homes sold in completed projects.
Watch this discussion with Rajan Bandelkar, vice-president at NAREDCO and Abhishek Rastogi, partner at law firm Khaitan.
[Video] Realty Under GST: What’s The Impact On The Consumer
“Capping GST at 6% will incentivise buyers to invest in under-construction properties, who otherwise are waiting for completed properties to save 12% GST,” said Rajeev Talwar, chairman of Naredco. “Buyers stand to benefit as developers would pass on the benefit to the buyers. The government also stands to benefit as it will collect more tax because of increase in demand. This is a win-win situation for all.”
According to Naredco president Niranjan Hiranandani, the industry body has also urged the government to increase the abatement for land cost to 50%, from the existing 30%, as cost of land forms the most significant part of any real estate-project cost.
GST on Under Construction Property
Real estate properties which are under construction is governed by the ‘works contract’. The GST Council had announced four rates for services – 5, 12, 18 and 28 percent. While 5 percent rate is mostly for transportation services, rates for restaurant services will vary as per tariffs charged and facilities provided, ranging from 12-18 percent; Gambling and cinema services will fall under 28 percent slab, as entertainment tax merged with service tax under GST while works contract is taxable at 12 percent with full input tax credit.
Under the current tax regime, works contract attracts a service tax rate of 6% which is a reduced tax rate under a special scheme known as the abatement scheme and a value added tax or VAT that currently ranges from 1 to 5 percent depending from state to state. While paying these taxes today, developers do not get a deduction of the input tax but under GST they will. This means that on the amount of excise duty and VAT they pay on cement or steel, no set off is available to them but under the new GST regime, developers and builders will be able to get benefits on taxes.
“The full availability of input credit as compared to current regime (where input credit is not available on excise duty paid on certain raw material inputs) is expected to be beneficial for reducing project costs under the GST system,” says Shubham Jain, vice president and sector head, ICRA Limited.
But will this reduce or increase the price of properties? “Houses will be cheaper or expensive depending on the current value added tax prevailing in different states. For example, if the current VAT is 2 percent and service tax rate is 6 percent, then though the total tax rate may increase to 12 percent, the price of the property may be cheaper if the benefit of additional tax credit outweighs the negative increase in the tax rate,” explains Harpreet Singh, partner, indirect taxes, KPMG in India.
“Buyers should not worry about the developers not passing on the benefit of the additional tax credit because GST also provides for an anti-profiteering provision which makes it mandatory for the dealer to pass on the benefit of GST to the end consumer. Therefore, it is a win-win for both buyers and developers,” says Singh.
Earlier, both homebuyers and developers received benefits under the abatement scheme (reduced tax rate under a special scheme). Under the service tax regime, for buying an under-construction flat, an abatement of 75 percent was allowed, subject to the flat being less than 2,000 sq ft and sold for less than Rs 1 crore, taking the effective tax rate from 15 percent to 4 percent. Similarly, if the cost of the flat was above Rs 1 crore and the size of the unit was more than 2,000 sq ft, the abatement was reduced to 70 percent and the effective tax rate to be borne by the buyer was 5 percent. States also charged VAT over and above service tax. This has now been done away with, say experts.
The benefits of Goods and Services Tax (GST) are quite big. Providing input tax credit will definitely bring the developer’s cost down, which is a positive outcome of GST on under-construction property. Also, the reduction in number of taxes will benefit the homebuyers. However, for this to happen, developers will have to streamline their processes to benefit from input tax credits. Only then will they be able to pass on the benefit of GST on under-construction property to buyers. Otherwise, despite anti-profiteering clauses in GST, homebuyers may still have to shell out a pretty penny for their own houses. Let’s wait and watch how this story develops.
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GST: Lower GST Rate Expected On Affordable Homes
Lower GST Rate Expected On Affordable Homes
The government agreed to lower Goods and Services Tax on under-construction affordable homes under 60 square metres to 8 percent from 12 percent
The administration consented to bring down Goods and Services Tax on under-development moderate homes under 60 square meters to 8 percent from 12 percent, Rajiv Talwar, executive of National Real Estate Development Council, told correspondents.
GST on real estate: How will it impact home buyers and the industry | Housing News
Goods and Services Tax has replaced multiple taxes, impacting the real estate prices, home loans, resale housing purchase, rentals and its final cost.
With the Goods and Services Tax (GST) intended to replace multiple levels of taxation, we look at how it will affect the real estate sector – from home loans and housing purchase to rentals, across various segments and the grey areas that will impact the final price for a home seeker.
GST Real Estate: No Added Burden On Buyers, Rent Exempted
Goods And Services Taxes (GST): Existing tax liabilities of homebuyers remain unaffected under GST. GST on Rent and GST on Rental Income from residential properties stay exempted.
As the Goods and Services Tax (GST) rate for work contracts has been fixed at 12 per cent, the benefits of investing in under-construction properties will outweigh the benefits of investing in ready-to-move-in homes under the new GST regime. Now, if you thought doing the whole calculation about work contracts is difficult for you as a naïve homebuyer, here is good news for you.
GST impact on real estate: Affordable housing may get a boost with segment turning attractive
Overall the impact of GST on real estate would be basically tax neutral but full of gains for the affordable housing sector.
With the implementation of goods and services tax (GST) from 1 July, the numerous sectors in the Indian market are to be affected. Real estate is one among them. GST has brought all indirect taxes (service tax, excise duty and value added tax which apply to the procurement of goods and services during construction) under one unified tax structure; leading to a scenario where there will only remain the direct taxes (capital gains tax and wealth tax), stamp duty and GST for all property-related transactions.
GST on Real Estate: 7 things you should know
Under revised order from the government, under-construction properties will be taxed at 18% which includes 9% SGST plus 9% CGST.
Real estate will be taxed at 18%:
Stamp duty and property tax to eventually be subsumed:
Detailed returns need not be filed this year:
Teething issues inevitable:
Easier redressal of taxation issues:
Transition period a pain for developers, consumers:
Unregistered vendors will be a headache:
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what is goods and service tax
Goods and Services Tax (GST) is an indirect tax which was introduced in India on 1 July 2017 and was applicable throughout India which replaced multiple cascading taxes levied by the central and state governments. … Under GST, goods and services are taxed at the following rates, 0%, 5%, 12% ,18% and 28%.
Goods and Services Tax (India) – Wikipedia
Goods and Services Tax (GST) is an indirect tax which was introduced in India on 1 July 2017 and was applicable throughout India which replaced multiple cascading taxes levied by the central and state governments. It was introduced as The Constitution (One Hundred and First Amendment) Act 2017, following the passage of Constitution 122nd Amendment Act Bill. The GST is governed by a GST Council and its Chairman is the Finance Minister of India. Under GST, goods and services are taxed at the following rates, 0%, 5%, 12% ,18% and 28%. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold. In addition a cess of 22% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products. GST replaced a slew of indirect taxes with a unified tax and is therefore set to dramatically reshape the country’s 2 trillion dollar economy.
How does the GST work?
GST is charged on the value or selling price of the products. The amount of GST incurred on input (input tax) can be deducted from the amount of GST charged (output tax) by the registered person. … However, if the input tax is more than the output tax, the difference will be refunded by the Government.
What is the difference between CST and GST?
CST means Central Sales Tax. CST/VAT is charged on sale of goods immediately up on preparation of Sale Invoice or immediately when goods are moved for sale. GST is charged on goods and services at the end stage of distribution of goods. Many indirect taxes including CST are being eliminated and merged with GST.
How tax is calculated on GST?
When adding 10% to the price is relatively easy (just multiply the amount by 1.1), reverse GST calculations are quite tricky: To figure out how much GST was included in the price you have to divide the price by 11 ($220/11=$20); To work out the price without GST you have to divide the amount by 1.1 ($220/1.1=$200)
What is GST charged on?
Once you have registered for GST, you must charge GST on your supplies at the prevailing rate. This GST that is charged and collected is known as output tax . Output tax must be paid to IRAS. The GST that you incur on business purchases and expenses (including import of goods) is known as input tax .
What do you mean by GST in India?
The GST is a Value added Tax (VAT) proposed to be a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. It will replace all indirect taxes levied on goods and services by the Indian Central and state governments.
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