Positive effects of GST on Real Estate


The real estate sector is considered to be one of the driving forces of the Indian economy. It has not only been a significant contributor to the India GDP but over the years has also generated a lot of employment.With a large number of taxes being subsumed under the GST Act, the real state sector taxation has been redefined completely.
When GST was introduced in July 2017, the GST on real estate was 12% with input tax credit and 8% for affordable housing projects. The input tax credit is the credit on the material used for the project. At the 33rd GST council meeting held in February 2018, rates were revised to 5% and 1% for affordable housing without input credit. Majority of the builders/developers did not appreciate the changes and wanted them rolled back, as they were more agitated with the input tax credit which the government had dropped in exchange with the new GST rates. After the developers expressed their concern about the input tax credit, the GST Council/ Government decided to provide a choice through a GST clarification stating that projects in which constructions have already been initiated before 1 April 2019, the developer will have an option to opt for the old or new GST rate. However, for the projects which will start after 1 April 2019, the developer will have to opt for the new GST rate without further entertaining any queries or questions online GST.


The changes in the GST rates are set to bring down the prices of property to a certain extent, but on the other hand builders and developers are complaining that the withdrawal of GST input tax credit will not allow them to pass on 100 per cent benefit to the ultimate consumer.
The real estate sector has been witnessing the sluggish trend for a long time and the government has made a lot of efforts to revive it, fall in the GST rates being one of them. In the previous regime, buyers had to face many hardships while purchasing a property, pay multiple taxes, charges & stamp duties which varied from state to state and so did the developers for which no credit was available. However, under GST, the buyer will benefit from reduction of prices as a single tax rate is applicable on properties under construction while GST is not applicable on completed or ready to sale properties. Further, increase or decrease in the tax levied on goods and services like labor, material suppliers, service suppliers etc. will have a consequential impact on the real estate industry as a whole.
Following reduction in prices, sales are expected to go up however the real impact of the rate cut will have to be seen in the long run and will also depend on how much benefit the developers are willing to pass on to the buyers.

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