With innumerable debates and diversified opinions, the GST has created quite a stir in the country. Being the second largest employer in the country, the real estate sector also comes under the ambit of the GST and the level of impact is what everyone’s focus is on now. The effects of the Goods and Services Tax would be evident only from two to three years from now and it is highly premature to decide anything as of now, in regard to the success/failure of GST.
What does GST impact do?
The Real Estate Regulation Act was passed in the month of May, which provides transparency and accountability to the end consumer and helps to gain the trust of the buyer from the developer’s point of view. With the arrival of GST, it is the same, wherein a transparency is created and helps to minimize lot of “unscrupulous transactions”. The service tax, VAT, excise duty, entry tax, octroi all now comes under the blanket of GST. GST law bounds to increase the margin in the hands of contractor/developer by removing all the above-mentioned taxes. However, “whether this benefit gets passed on to the end-consumer is unsure as pricing of real estate is driven by market forces than on costing principles”, observes of the tax experts.
The exact rates of GST on real estate
As of now, the GST doesn’t include the sale of land and building but may be taxed within a period of a year. However, the rates would affect the amount of cement, bricks and iron under the new act.
Cement will be taxed at the rate of 28% under GST. The rate is much higher than the current average rate. Iron rods and pillars used in the construction of buildings is charged at the rate of 18% which is almost similar to the current average rate of 19.5%.
Also, the brick used for the purpose of construction of buildings comes under the ambit of GST at the rate of 28%, except for the rate of ceramic building bricks which is under 5%. At present, 25-26% is the tax rate that is charged except for the ceramic bricks. A good news is that the logistic cost of the transportation of bricks, cement or iron would come down as the taxes are being streamlined.
Apart from residential buildings, GST for commercial buildings would remain neutral at 12% slight savings and 18% slight increase and the affordable housing is exempt from the service tax.
Though GST is being implemented to streamline and consolidate the taxing system all over the country, there are certain ups and downs that need to be faced, till we reap the benefits completely. And real estate industry is one such industry where it is not heavily burdened with taxes and poses a threat for the future. Also the much needed transparency accountability is a benefit as of now because of the goods and services tax.