Over the years there were only talks of GST implementation. But, when it was finally implemented it was a historic reform in India. Goods and service tax have always been debatable. But, it indeed has made an impact of GST on the Indian economy. Every sector has been affected by this tax implementation.
Some sectors have benefited while some have not. GST is a simple tax that covers all the taxes in India. An indirect tax that covers the goods and services of the Indian economy. GST has indeed left a mark on each sector as a direct tax structure. It has eliminated the need for all the induvial tax collections making it a transparent system. GST has also affected the real estate market.
Impact of GST on real estate
The real estate market of India works on economic changes and the tax systems. It is also affected by the homebuyer’s emotions. Earlier there was no transparency in the real estate tax system. Homebuyers used to get confused while purchasing a flat. As a homebuyer even, you would want a system that is transparent and regulated.
GST has surely made an impact on home buyers and the trust is regained. As the system is transparent, it’s intended to increase the trust between a homebuyer and a real estate developer. The taxes were calculated on the different rates on the purchase of flat. But, with the implementation of GST, the rates are increased to 12%.
Most homebuyers are confused regarding service tax, VAT, stamp duty and registration. But, with GST you have to pay a single tax all-inclusive when you purchase a flat. Service tax in the real estate sector was always levied according to state and central. So, there was a separate state tax that you had to pay along with the central tax. Even construction charges were included in taxes that you had to pay at real estate prices. With own set of different figures and taxes, it was too confusing.
After GST, everything is calculated in a more organized way. Homebuyers have truly benefited from the introduction of GST. The calculation of tax is simple so it is truly an advantage for real estate developers.
There is no stress of paying taxes at different rates. Even under construction and construction prices are included in GST today. A single tax benefit with so many prices is like a boon to a homebuyer. Understanding the concept of GST related to real estate prices is also simple.
Impact of GST on the industry
For real estate developers too, GST is good news. All the costs are reduced and it is all included in different taxes and duties. A real estate developer has to pay any costs on the procurement side that includes customs duty, central tax, excise tax, and entry tax. With the introduction of GST in real estate, the costs of taxes are reduced including the construction tax. GST has made all the real estate taxes more clear so there are no added costs.
With the introduction of GST in real estate, there has been a boost in the purchase of flats as well. Homebuyers are now seeking every opportunity to purchase a flat. It is certainly a good time for the real estate market.
The market trend is fast catching up under this rate bracket. If only the costs increase and GST is increased for the real estate sector, it will affect the home buyer too. For now, the rates look good and the GST bracket is also great. As a homebuyer, you also need to know the right bracket before you purchase a flat. You must be aware of rates and all the taxes that GST as one tax offers.
Impact of GST on the rental rates
It’s a great time for property rentals also. If you earn under rentals, the income won’t be charged under the GST bracket. Only if the property is rented for a commercial purpose, it will be charged at the rate of 18%. The stamp duty and income both will remain unaffected under this scheme. If you talk about rentals, then it will really be beneficial in the future for sure. The EMI defaults will also be included under rentals. But this again depends on home buyers or people who are opting for rentals.
For one price
The biggest advantage of implementing GST is a single tax benefit. As a home buyer, you don’t have to worry about any taxes. Even while purchasing a property that was under construction, there were related taxes. Everything is included in a single tax and home buyers seemed to be happy with the tax relief.
Calculation of taxes was also a headache earlier. But, with GST everything is worked on in a single tax. For now, every tax is clubbed under a single tax. A single tax applies to the overall purchase price of the flat. As a homebuyer, when you will search for a property, you don’t have to worry about implied taxes anymore. GST has really changed the ways in the real estate sector.
The only problem with GST in the real estate industry is that it needs better compliance. There are many homebuyers who are not aware of the taxes. Some are not even aware of rates and GST bracket of the real estate sector. The compliance of GST and other taxes should be automated. Every homebuyer must be aware of the rates and taxes while purchasing a flat.
Every real estate developer needs to prepare a transparent automated system for GST taxes. An automated system makes the work easier. Automation of GST in real estate will help in timely compliance and cost-effectiveness. It will also eliminate the need to understand things at a micro-level.
India is in a digital age where everything is automated. It’s a must to get real estate GST also automated. GST will further boost the real estate sector for sure, this is just the start. It will benefit both home buyers and the real estate industry. Things have already changed with RERA, and it will further change with GST. GST truly applies to the rule of one nation, one tax.