Real Estate Industry Awaits Clarity on GST


RERA
Karnataka RERA leaves buyers disappointed
Highlights
  1. Developers divided on the impact of GST on Real Estate
  2. Real Estate experts believe that GST could be fixed at 12% for the sector

After the government announced the tax rates for various goods and services under the new Goods and Services Tax (GST) regime the only question on everyone's mind has been, what will be the impact on property prices. Instead of clearing the doubts and answering some questions, the two real estate industry bodies NAREDCO and CREDAI seem to have added to the confusion. 

According to real estate industry body NAREDCO, prices will not go up. 

"We do not expect an inflationary impact on prices. This (GST) is a good neutralising measure. The actual tax incidence under GST would match or be lower than the existing multiple indirect taxes on the sector. The rate of 12 per cent which will be applicable for the real estate sector, is inclusive of the value of land and with full Input Tax Credits,” Rajeev Talwar, Chairman NAREDCO, and CEO DLF said.

 

"It will subsume more than 16 major taxes and levies into a single consolidated tax. Moreover, the unified tax regime will stop the unwanted practice of double taxation, which hurt real estate and other sectors, given their cascading effect which inflated prices for end users. We are now looking forward to clarity on issues related to affordable housing," Parveen Jain, President NAREDCO and CMD, Tulip Infratech said.

But according to CREDAI the consumer will end up paying more if the government does not take measures for stamp duty exemptions and allow abatement for land.

"For real estate, the GST rate fixed at 12% is only a fraction of its tax burden. Real estate sector is exceptional because GST regime does not eliminate multiple taxation. Stamp duty, levied by the states on all immovable property would continue to remain in force even after implementation of GST.The additional burden on real estate on account of  stamp duty averages between 5% to 8% of the value of the immovable property," Jaxay Shah, President, CREDAI said. 

CREDAI has urged upon the government to minimize double taxation of real estate by treating land as zero rated under the GST regime."Unless abatement for Land is allowed, the cost to the end consumer would go up," Shah said. 

Maybe we will have to wait for the next meeting of the GST Council scheduled for June 3, 2017 for more clarity. In this meeting the Council is expected to fix the rates for six politically sensitive items-gold, textile, agricultural implements, bidis, footwear and bio-diesel.

The GST Council under the Chairmanship of Finance Minister Arun Jaitley, has fixed the rates for 1200 goods and 500 services which will be applicable once GST comes into effect from July 1, 2017.

 

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