Impact of GST on Real Estate Sector

By GSTBazaar

1st August 2017


Good and service tax regime is expected to bring some significant changes in the real estate market of India. The Indian real estate sector is one of the most globally recognized sectors. In India, real estate is the second largest employer after agriculture and is slated to grow by 30 per cent over the next decade.

Goods and service tax regime aims to bring much more transparency and simplicity in the real estate sector. Earlier the taxation system for GST regime was quite complicated as a number of indirect taxes like VAT, service tax, stamp duty and registration charges were required to be paid on the purchase of an under-construction property. Also, each state specifies its own rates since VAT, stamp duty and registration charges are state levies that adds to the complications. Further, service tax was a central levy and was charged on construction. However, in the case of purchase of a completed property, the tax applicable were stamp duty and registration charge.

 Under the GST regime, a uniform rate of 12% (excluding stamp duty and registration charges) will be levied on all under-construction properties. However, no indirect tax is applicable on sale of ready-to-move-in properties. That will drastically reduce complications of calculating the amount of taxes to be paid.

 The benefit of GST will also be extended to the developers in real estate sector. As earlier they were charged for Central Excise Duty, VAT and entry taxes collected by the state on construction material costs. These all taxes will be subsumed into one tax due to which overall tax burden will reduce.

In addition to this goods and service tax regime has ensured a swift system of transportation and logistics due to which cost associated to it has reduced drastically. Moreover, as GST regime is the single of point of taxation so the cost of maintaining multipoint warehouses will reduce due to this overall cost will be reduced.

Most importantly there is only a slight increase in tax rates applicable to major inputs like steel and cement. Under the earlier regime, the indirect taxes applicable on steel were around 17 per cent and that has now come to 18 per cent similarly the tax rate on cement has been increased to 28% from nearly 24 %. Also, the reinforcements and iron bars will be taxed at the rate of 18% which is marginally lesser than the current rate of over 19%. However, the tax rate on bricks used for construction will be 28% whereas currently, a rate of around 25% is levied inclusive of all indirect charges.

Thus goods and services tax has positive effects on real estate sector.


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Impact of GST on Real Estate Sector