By Accommodation Times News Service
Mr. Parveen Jain, President, National Real Estate Development Council (NAREDCO)“The passing of the much awaited GST Bill in this Monsoon Session has spread happiness among the real estate community because of the benefits it will offer to the sector. The enactment of this law will single-handedly solve many of the challenges faced by the real estate sector and help in pulling the sluggish sector out of its long slumber. Heavy taxes that are being paid currently by the developers will automatically go down by a considerable percentage. Construction costs would be reduced to some extent and this benefit could be passed on to the customers, thereby triggering transactions in home buying. There would also be a positive impact on the commercial property segment, as commercial real estate which is already starving from funds could see some kind of a revival.”
Mr. Rohit Gera, MD, Gera Developments and VP, CREDAI – Pune Metro
“The passing of the GST related amendments is an extremely welcome step. This will help in terms of ease of doing business in the country. We hope that the final bill takes care of the home buyers and does not raise the cost of homes by raising the tax incidence on homes. Stamp duty will continue and there is already double taxation on this. The first time stamp duty is paid on land, then the flat buyers pay Stamp duty on the flat without any credit for the land payment. Without addressing the needs of home buyers the government’s desire of housing for all will not be met.”
Neha Hiranandani, Director, House of Hiranandani
The passage of Goods and Services Tax (GST) Bill is the biggest indirect taxation reform in the country. It would be a harbinger of change for the real estate sector which is currently plagued with a myriad of indirect tax issues both at the centre and state level. We hope that the bill brings in a more comprehensive and uniform tax structure that will ensure greater transparency in the sector. The GST will enable a smooth and seamless distribution network in India which will lead to in-time delivery of building material across India. One of the positives that might come from the bill is removal of restrictions on credit utilization that will strengthen the credit chain in the system. However, since GST will be applicable on the materials purchased by the developer to construct the project, it will have a direct impact on the total costing of the project. The bill treats construction activities as “work contracts” but is silent about guidelines on valuation of land and has kept the sector away from input tax credit. This could mean higher costs for the end consumer. Also, implementation of the bill will not subsume the stamp duty levied by the states, which may increase it from time to time to meet revenue targets thereby pushing costs higher for the buyer. It will be important to see what the final rate of GST would be because if the rate is higher than the existing cumulative taxes, it will certainly be dampener as it will increase the final cost for buying an under construction flat and defeat the purpose of the bill. While the intentions are noble and correct we feel for the bill to be successful all states must implement it together and at the same rate, else it will be cumbersome and bring additional compliance on an already strained sector.”
B Nesar, Executive Director, Concorde Group
GST has been long overdue and if the tax structure is applicable as expected, it will greatly benefit both the consumers and developers. Presently, home buyers pay service tax and VAT on purchase of residential units when booked prior to completion. There are other components like excise duty, customs duty, CST, entry tax, etc. paid by the developer which is added to the pricing of the units. All these tax add upto anywhere between 22%-25% of the price of the units. However, the real impact will be known once the final GST rate is announced. We definitely expect benefits in the long term on account of tax related compliance and gains of taxation on raw materials like steel, cement etc.”
Mr. Vineet Relia, Managing Director, SARE Homes
“The implementation of GST is likely to improve transparency and reduce tax evasion on account of better enforcement and compliance. The home buyer in general could benefit from the introduction of GST if the rates are moderate. The fact that works contract would be taxed as a service under the model GST law is a welcome move and is expected to provide certainty on taxability of the construction sector. This should lead to reduction in tax costs as the tax would be now charged on the actual contractual base and there would not be any overlap of VAT and service tax on a certain portion of such contracts like under the current regime. However, for the developer, the aspect of valuation is a matter of concern as currently no deduction is provided under GST for value of land. This can contribute to higher tax burden considering that there is already an additional tax incidence in the form of Stamp duty on value of land.”
Gunjan Goel, Director, Goel Ganga Developments
The implementation of the Goods and Services Tax (GST) is overall being perceived as a positive commerce module. For real estate in particular, it will bring down the tax burdens felt by developers on construction material, which will consequently benefit the buyer with reduced housing costs. The primary benefit would be that all the multiple indirect taxes will now be clubbed under one structure, leaving only the direct taxes and Stamp duty alongside. This would add some efficiency to payment transactions and hep reduce tax evasions, overall increasing the transparency, which will create more trust and confidence in buyer and investor sentiments. Having said that the implication of the GST would vary while purchasing a ready possession home versus one that is under construction.
Mr. Rohan Agarwal, Managing Director, Geopreneur Group
It will be important to see what the final rate of GST would be because if the rate is higher than the existing cumulative taxes, it will certainly be a dampener as it will increase the final cost for buying an under-construction flat. Construction costs would be reduced to some extent and this benefit can be passed on to the customers. Stating that the real estate sector shares positive symbiotic relationships with more than 250 other sectors such as cement, steel, IT the benefits or drawbacks of GST on each sector will also have an indirect impact on real estate and vice versa.
Mr. Navin Makhija Managing Director – The Wadhwa Group
The GST (Goods & Services Tax) Bill was unanimously passed by the upper house of the parliament this week. This is one of the landmark reforms which the industries had been anxiously waiting for a long time. There will be a marginal impact on the real estate industry as the bill is positive for the ancillary sectors. It will have an overall impact on the raw materials which includes concrete, steel, bricks to name a few. There will be a drop in raw material prices, which in turn may create enhanced demand as it is likely to be passed on to the consumers directly. This, in turn, may see some renewed interest of buyers towards buying properties. However, it is too early to comment in detail on the implications of the bill.
Mr. Deep Kantawala, Group CFO and Head, ICS Real Estate Partners Private Limited
“Introduction of GST will have far reaching impact across the Indian economy- not only reducing overall tax impact for consumers but also significantly streamlining and reducing the complexity of doing business. This in particular for businesses which have operations in multiple cities- retail, FMCG and consumer companies and logistics business. GST is a comprehensive tax on manufacture, sale and consumption of goods and services at a national level. So, it will do away with additional tax on the movement of goods across state boundaries. From a retailer point of view, rentals are a major component of overall operating cost. With GST, they will now be able to set-off service tax paid on rent against taxes on goods. This has been a long standing demand and will help to reduce overall cost of operation for retailers. With increased consumption and cost rationalization, mall developers / owners (existing and new) will now not only be able to charge higher base rent, but more importantly they will earn incremental income from turnover-share clauses with retailers. Overall a win-win situation for retail trade and for retail real estate sector in India.
Ravi Ramu, MD & CEO, VBHC Value Homes Private Limited
“Affordable housing requires an easing of doing business for both the builder and the buyer. GST is a giant leap in this direction. We are delighted at the prospect of dealing with easily understood and implementable indirect tax laws. The marginally higher incidence of indirect taxes through the introduction of GST, if any, will be more than compensated for by the savings in time and effort in operating a far simpler law.”
Mr. Ravindra Pai, MD, Century Real Estate
Our current tax structure is plagued with confusions, compliance issues, lack of transparency, cumbersome laws and endless paperwork. The result is we are ranked at 130 out of 189 on the World Bank report on ease of doing business index. Further, the ranking of Dealing with construction permits is at 183, getting electricity is at 70, registering the property is at 138. GST is aimed at clearing the hurdles and bottlenecks in the economy. In short GST can be defined as “One country, one market, and one tax. GST is backed by the strong IT backbone eliminating major paperwork. Major implications of GST would be: Ease of compliance, Uniform tax structure, Seamless supply chain, Transparency, Reduced time and cost, Easy administration
On the other hand, if we look at the contribution of the Real Estate to the Indian economy. Real estate supports 250 industries, accounts for 6.3% of the GDP and the second largest employer (Source: IIM Ahmedabad report). Now if we have to stitch the above facts together it is apparent that the real estate stands to get the lion’s share of benefits.
Overall we see that the policies moving in the right direction. We can expect lot of synergies in the economy which would boost the industry and the customer confidence. In the end it is not only the industry or the builder who stands to gain, but the customer who will be the real winner.”
Mr. Vivek Agarwal,Managing Director, Leverage Group
The passage of Goods and Services Tax (GST) Bill is the biggest indirect taxation reform in the country. This law will single-handedly solve many of the challenges faced by the real estate sector. Heavy taxes that are being paid currently by the developers will automatically go down by a considerable percentage. Construction costs would be reduced to some extent and this benefit can be passed on to the customers, thereby spurring home buying. Apart from the significant reduction in tax management expenses due to a single unified tax, the compliance costs will go down too.