Real
estate sector is one of the major sectors in India which is seen a source of
employment and an income earning source for many people. We will discuss the
effect of GST on various construction activities and whether the implementation
of GST is beneficial to the real estate or not?
The
first advantage with GST is the uniformity of tax structure in all the states
and the elimination of taxes such as octroi, entry tax from one state to
another, excise duty etc. Other than that the service taxes and the other taxes
such as VAT were different in each state which are regularized and made the
same with the implementation of GST.
Another
advantage with GST is the transparency and accountability in the construction.
The contractor or the builder in the real estate sector is at benefit through
GST as the profit margin increases for them through the reduction and
similarity of tax prices.
When
it comes to the consumers or buyers, there is not much change because the
prices of the land or building is decided by the market value and based on the
prices in a particular locality. But this scenario may change soon due to the
implementation of GST on the sale of land and constructed properties.
When
we see the impact of GST on the construction material, there is no much
change in the prices of bricks, cement, iron etc. as there is only a marginal
change due to the implementation of GST on these materials. The transportation
of material used to make a lot of difference in the construction due to octroi
and various other taxes which is not there now.
When
we look at the impact of GST on home loans, there is no change in interest rates
and stamp duty as GST is not applicable to both. The processing fee which is a onetime
payment has a slight increase of 3%. The lenders whether it is banks or other
financial institutions will charge for EMI default. This charge on the delay of
the payment goes up by 3%. The lenders have some benefit through GST brings tax
savings for the lenders.
The
slab rate for the buyers while buying properties and land can be 12% which is not
yet decided, but this rate can be a burden on the buyers because of this slab
rate. The slab rate on the properties may vary for properties above and below 1
core. If this is implemented then buyers can get affected if the charges in properties
are more.
The
conclusion on whether is it beneficial to implement GST in the real estate
sector is that there is no huge difference in the prices of the construction
material. The builders, lenders are on the beneficial side due to the
implementation of GST. There is no impact on the buyers of the land or
constructed properties which may change in the future when the GST is
implemented on the land or constructed properties.
