On August 3 and 8, respectively, Rajya Sabha and Lok Sabha unanimously passed a bill to allow the deployment of GST – Goods and Services Tax, which is known to be one of the biggest tax reforms in India. Since July 1, 2017, the GST has been effectively collected in the country. This tax replaces multiple taxes levied by the central and state governments and all direct and indirect taxes, including the central consumption tax, business tax, octroi taxes / charges, value added tax (VAT), and tax on services.
The Indian real estate sector has undergone a significant transformation in recent times. The recently implemented (RERA) addressed assurance at the level of responsibility of real estate builders and developers and instilling transparency in this sector has been revolutionary in the history of the Indian real estate sector. For the residential sector in India, the GST will definitely be a positive boost in sentiment among property buyers.
Here is why the GST will have a positive effect on the real estate sector in India:
1. Low cost in construction
GST will reduce the rate on items such as cement, steel, etc., resulting in considerably lower construction costs. This will lower real estate prices and will eventually be a benefit to the common man.
2. Integrated tax system
In general, in the real estate industry it is essential to have a uniform tax base. Currently, builders and developers pay taxes even on the purchase of their raw materials. GST addresses these issues by making all taxes uniform.
3. Neutral Income Rate (RNR)
The method of tax operation in real estate is not synchronized between VAT and service tax laws. This problem can be mitigated with the help of GST that would help to maintain a transaction system: the Neutral Revenue Rate (RNR), which is decided by the departments of the State Tax on Goods and Services (SGST) and the Central Tax on Goods. and Services (CGST).
4. Facilitate compliance
With the help of GST, it will be easier to keep an audit trail for better control and monitoring, and fully benefit the Indian real estate sector. It will effectively reduce the complexity of compliance, providing efficiency and smooth transactions.
In general, the goods and services tax (GST) will have a marginal impact on the real estate sector in the coming days. There will be notable improvements in buyer sentiments and changes in buyer perceptions against this sector. Developers will also find the GST regime much easier to work with, with the benefit of the input tax credit as an added bonus.