By Accommodation Times Bureau
With the recent issue of the GST, one should first get to know what it really is. GST stands for ‘Goods And Services Tax’. It can be simply defined as the tax levied on every supply of goods and services. The passing of this bill will be very helpful with the change in the tax structure and will consolidate various indirect taxes, it may be seen as a large amount of tax to be paid but if seen for the long run it is more beneficial than simply giving away the taxes that are not mandatory and can be proved to be a burden on the people who are not much efficient to pay those taxes. It will be beneficial for both the government as well as the public at large which will also give rise to the economic growth and will lead India to hold a better position at the international level.
The major issue arising from the introduction of new GST bill leads to the problem of taxes that falls under the major divisions that are the division between 12-18% and the ones of the luxury goods of 28%. Within the ambit of 12-18% lies the taxes related to the real estate. It can be noted that the existing tax liabilities of homebuyers will remain largely unaffected after the introduction of the new GST regime. Currently, a homebuyer has to pay several indirect taxes including the excise duty, value-added tax and service tax which amounts to a tax outgo of about 11 percent, excluding stamp duty.
Whereas under the new regime all the indirect taxes will be subsumed and the buyer will only have to pay a uniform tax of 12 percent on the purchase of the real-estate, except the stamp duty. This is mainly for the construction sites that are under construction but are not completed ready-to-move-in apartments. On the other hand the entire input credit- excise duty and central sales tax on construction materials that are to be paid by the developers themselves- this will also be allowed, unlike the early times.
Meanwhile, the government has strictly ordered the developers to pass on any benefits that they may avail under the new tax regime to the homebuyers. Here in the new tax regime for the real estate, the builders are expected to pass on the benefits of the low tax burden to the buyers of the property by the means of reduced prices or instalments. The buyers till date do not have to pay higher tax rate rather it is to be paid after the imposition of the tax.
As real estate is estimated to account for about five percent of India’s gross domestic product (GDP). The ratio of tax might have increased but it will simplify the tax compliance as all the indirect taxes are subsumed within the bill itself. As the bill proposes to roles down all the taxes into one, the cost of production will come down and eventually the real-estate will be cheaper than earlier which will give rise to the purchase of them. To be seen the change in the tax system will be proved beneficial for the sector of real-estate.