- By Editor
- 29th March, 2019
The long-awaited headline maker GST Act had finally been implemented on the 1st of July 2017. It was considered as one of the most revolutionary acts thanks to its buyer-friendly nature. At the time when GST was getting ready to put its legs in the market, the Indian market was already dealing with the sudden implementation of demonetization and RERA. It can be said that 2017 was one of the toughest years for the Indian real estate industry as well as the economy. The real estate sector provides approximately 7.8% GDP to the Indian economy and is considered as the second largest employment generator after the IT sectors. Therefore, the smooth functioning of the real estate sector is important.
From the moment the GST Act was implemented, it has stressed out many developers and individuals who pay tax; the reason being none other than the compliance requirements it possesses. Different industry specialists have voiced different opinions regarding the effects of it. One of the most important aspects of the GST act is that it has brought transparency in the functioning of India’s most pivotal sector, i.e. the real estate sector.
The GST act is considered as one of the most simple acts because it applies to the price after the overall purchase. It seeks to transform the Indian real estate market with its unity slogan, the "One Nation, One Market, One tax" principle. It is considered as a pro-buyer act as the buyer does not have to pay the indirect tax on the sale of a ready-to-move-in property. There is a direct and indirect impact which is quite significant in both the zones, i.e. buyers as well as developers.
Following are a few points which will give you a brief idea of the impacts on both sides.
Impacts on buyers:
Under the regime which was followed before GST, a buyer had to pay for the VAT, service tax, registration charges and stamp duty on the purchase of properties under construction. Since VAT, registration charges and stamp duty charges were state levies, there was a huge difference in the price, varying from state to state.
Every property which is under construction will be subjected to a 12% charge of the total property value, which will exclude stamp duty and registration charges. As for the projects of buildings or any property which are completed, the earlier provision will work as it is. GST is not applicable to the sale of certified completed properties or the reselling of the old properties.
In simple words, buyers should stay calm and wait for the complete understanding of GST which will have an impact on the property prices and their buying decision.
Impact on developers:
Before GST, developers had to tolerate excise duty, VAT, Customs duty, Entry taxes, etc. Other charges included raw materials, labour charges, inputs and service tax fees, legal charges and all. Most importantly, ITC was unavailable for duties like CST, customs duty, Entry tax, etc. This pricing burden would automatically shift to the buyer. However, after the implementation of GST, construction and other costs are significantly reduced, a number of taxes are summed up and the availability of ITC made it much more relaxing.
It was just a brief idea about the new rules in the market act. This can help you know a little but quality understanding of the GST Act. There are quite a few facts which are still under the curtain for the buyers as well as the developers. It needs a deep study of GST, plus a little patience for its every layer to get uncovered.