After the country’s independence, the largest Indirect Tax Reform GST is going to be implemented across the country from July 1. The government says that GST will be benefited from the business, investor to the common man. However, the address of government claims will be run in the next few months, but confusion has now increased from home buyers to developers. This is due to fix tax at the rate of 12% on the Overall property in GST. The government says that with the introduction of GST, the tax burden on the realty sector will be reduced, which will be benefited by home buyers. At the same time, developers say that with the introduction of GST, the burden of tax will not increase but will increase, thus increasing property prices. As a result, the increase in price will be compensated by the home buyers.
Arguments in favor of price reduction after GST: The government says that the property market in GST has been taxed at the rate of only 12 per cent. At present, the duty on merchandise tax is more than two times the GST of excise duty, customs, entry tax of the states etc. on the realty sector. If GST is implemented, this sector will not only burden the tax but will benefit from input credit. In such a situation, the developers would be able to bring the benefits of tax rebate to home buyers. Not doing so will be considered as profiteering under the GST Act 171 and action will be taken.
The benefits of tax exemption: Senior Consultant VS Date, Taxman.com, told that if a 2 BHK flat costs Rs 60 lakh, then there is a cement and iron rods of about 20 lakh rupees. Excise duty is paid at the rate of 12 percent on this. That is, a tax of Rs 2.4 lakh goes on. Developers will get this tax input credit as soon as GST is implemented. That is, the amount of savings will be on the construction of a flat. Developers can easily pass this savings to passers-by to home buyers. This will help in reducing the value of the home, which will be benefited by every buyer.
Argument in favor of price rise: Gitambar Anand, the chairman of the real estate industry body CREDAI, told that the burden of tax will not increase after GST but will not increase.This is because tax is charged at the rate of 12 percent of the total property price of GST. At the same time, it is a service tax of 4.5 per cent. At the same time 75 per cent of land cost is tax free. Think of it as if the value of a property is 5000 rupees square feet and the tax on the rate of 12 percent under GST would have to be given to 600 rupees to the home buyers. At the same time, construction cost per square feet is just 2000, which will save about 400 rupees from input credit. In such a way, the tax burden of Rs 200 per square feet will increase, which will work to increase the cost.
Rakesh Yadav, CMD, Real Estate Company, Space India Group, said that in GST, the government has not given the abatement on land cost (exemption of land prices). The cost of land in Metro and Tier II cities is so high that project costs are quite expensive. In such a way, the cost of the project will be increased if the land cost is included in GST. In the under construction property of GST, the buyer will have to pay stomp duty and other charges in addition to 12% GST. So far, the service tax has to be paid at just 4.5 per cent. Along with this there is no tax on 75% of land cost.It is not possible the cost will be decrease after 1 july.
What should do a home buyer?: Mukesh Kumar Jha, a business expert, said that the new home buyers should adopt the ‘Weights and Watch’ policy on the situation in the property market about GST. Any greed or savings should be avoided in any hasty decision. Picture willbe cleared after GST is implemented.