From the time GST has been implemented, there have been pros and cons on implementation. Almost every sector has been affected because of the implementation of Goods and Services Tax. Goods and Services Tax is a uniform tax that will make a difference. You do not have to pay individual taxes or rates because it’s just one tax that is calculated. This is beneficial for both customer and the people who are involved in day-to-day business. Even the real estate sector is affected by GST. Actually, after RERA there has been transparency in home buying. As a buyer, you will only gain further with GST in the real estate sector.
On the constructed property
finance ministry of India has given a clarification regarding Goods and Services Tax that is applicable after the construction. The GST will not be applicable to the already constructed property. If a particular property obtains a completion certificate, the GST will not be applicable to the said property. This will affect all the segments and homebuyers too. This will also impact the stakeholders. This also applies for ready to move flats. If you can move in the flat where the occupancy certificate is given, there will be no GST applicable there. This will bring a change in the sector for sure.
The applicability of Goods and Services Tax was a great move towards one nation and one tax. The Goods and Services Tax for under construction flats has been given a bracket of 12%. This is on flats that are still being constructed. But, there was a standard ruling to an input tax credit for under construction as well. An input tax credit was to be passed to homebuyer for a very neutral process. The aim of GST in any sector including the real estate sector has been to make the system more transparent. Its to do with the tax neutral proportion.
The clarification on GST
With so many tax calculations and Goods and Services Tax implementation, still, there is no clarity on the flat purchase. A recent announcement was made regarding the GST on flat completion. It was stated that the Goods and Services Tax would not be applicable on ready to move. This is where the sales take place after the completion of the certificate. That is the certificate that is obtained after ready to move in flats. As there is no clarity regarding this issue, this will actually affect a homebuyer. If there is no transparency in the system, a homebuyer would hesitate to but a flat. This will also affect the real estate developer.
GST on under construction properties
All the properties that were completed or ready to move in were out of Goods and Services Tax bracket. This actually made buyers think about the choice of purchase. According to a recent report, there is a massive unsold stock of property, which is ready to move in. The figure is only increasing by the day. The stock is calculated for all the major metro cities of India. There are projects that are ready to move in but do not have completion certificate. These flats will attract GST. As a home buyer, it means that the price of the flat that you will buy will increase. Overall spread of options will reduce in this case.
As a buyer, you have to know about the bracket and the flat that falls under this category. When you purchase a flat, you need to know about the rates and costs that fall under Goods and Services Tax. With a transparent system, things will be clear on your end and real estate developers end. Ready to move in properties with a liable construction certificate will attract many home buyers.
GST on properties without completion and impact
There is no choice left for developers to levy Goods and Services Tax charges on ready to move flats. The flats that have no completion certificate yet are in the bracket of GST now. As there are many unsold flats, there will be a time when ready to move flats with no completion certificate will be at par with under construction projects. Now, this will not only affect the homebuyers but it will also affect the real estate developers. The overall cost will be affected and this will create a different situation in the real estate sector for sure.
This will have an impact on the secondary market for sure. The secondary segment of real estate does not attract any kind of Goods and Services Tax. But, this also depends on the properties that are completed. As a home buyer, you will have to evaluate the options of buying a flat. You will have to look for projects that are ready to move in with the certificate. The first purchase units will fall under the bracket of 12% GST. This can also affect the sales on flats. There needs to be a system that is completely transparent for buyers and real estate developers.
Impact on unsold inventory
The unsold flats in the primary market of real estate are going to increase in future. Most homebuyers will consider resale or ready to move in units now. As these units are exempt from Goods and Services Tax, homebuyers will give it more preference. GST that is levied on ready to move flats without the completion certificate will have added costs. Now, most developers have no choice but to accept the rates and costs as they are. A real estate developer wants to sell flat and a buyer needs to purchase a flat so there has to be a way out somewhere.
To sum up
Goods and Services Tax has hugely influenced every market. It will surely make an impact on real estate too. For now, a home buyer and real estate developer both are confused regarding the bracket of actual rates. As a home buyer, you can seek some advantage in the purchase of flats that are ready to move in. There will be further clarity on this in future. Affordable housing will become strong and there will be an increase in the sales of flats. As a home buyer just understand the rates before you buy a flat. As a real estate developer, you need to be transparent regarding the GST tax.
Tags: clarification on GST, Goods and Services Tax, GST, GST Impact, GST on properties without completion and impact, GST On the constructed Property, GST on under construction properties, Home buying, Home Cleaning services, HomesFY services, Impact of GST on Home Buyer & the Industry, Impact on unsold inventory, Mumbai Real Estate