GST is in the news ever since its implementation in almost all sectors and products. With Real Estate and Regulation Act already in place to provide a mechanism for this tax regime to work, the aim of the government is transparency and simplicity in real estate market. Due to the lack of proper infrastructure, the builders are not being able to sell a single under construction flat for quite some time. But notwithstanding this, there are certain projects that have been accomplished amid this chaotic situation and they are doing great business. Real estate has faced a deep loss and lag after demonetization and in the current setting it is expected that the real estate industry will suffer further as the cost of purchasing new houses would be increased by 8% which consequently reduces the demand in real estate by 12%.
From developers’ point of view –
From the developer’s point of view, this decision of implementation of GST will result in lower construction costs. Overall, tax incidence on inputs like cement and steel has great chances of declination that may lead to improved margins for the developer. Customers might face a different loss or even benefits. Additionally, further clarity is required on the availability of input tax credit with respect to works contract which results in construction of immovable property as it will determine its impact on the sector.
From customers’ point of view –
If customers’ point of view is considered, the impact of GST on the real estate sector will hinge on its effective implementation rate. Customers may not invest on lavish projects. The biggest and perhaps the only takeaway is that GST is a simple tax that applies to the overall purchase price. The projects under construction will be charged at 12% of the property value. This excludes stamp duty and registration charges.
Prior to GST, a huge percentage of each real of the estate project expenditures went unrecorded in the books. GST will cut down this percentage due to cloud storage of invoicing. Projects like Prestige Jindal and Salarpuria Sattva Park Cubix are considered to be most profitable amongst the recent projects undertaken in Bangalore. It is considered that due to the implementation of GST, automation will provide a huge array of benefits which includes compliance and report generation and many other aspects. The reduced cost of logistics will result in a reduction of expenses as well. So, the impact is both positive and negative for both developers and customers.
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