Impact Of GST On Real Estate Sector
The Goods and Services Tax (GST) was introduced to transform India with its principle of ‘One Nation, One Market, One Tax’, and India’s real estate sector couldn’t be left out of the process. The industry was involved in disputes due to the multiple taxation and it was expected to simplify the taxation compliance and have a desirable impact of GST on real estate. But did it really?
It is believed by some that GST on housing has just made it costlier. The projects that are still under construction, are just adding up to the budgets of the buyers. So, they are now preferring the ‘ready-to-move-in’ houses to get rid of the GST burden.
GST Not An Eliminator Of Multiple Taxes In Real Estate
The input tax credits can be availed by the developers to share the GST burden, but only a few have done that. It is also argued by the developers that the calculation of sale price under GST is a complicated and a time-consuming process. There are many state and local taxes that are imposed on the sector other than GST.
Aditya Kedia, Managing Director of Transcon Developers says, “With 12 per cent GST, stamp duty, registration and many other local taxes, the sector is burdened with many invisible taxes. If all these taxes have to be subsumed under GST, then, the tax rate has to go up or the government has to compensate the local bodies.”
GST a failure in the Real Estate Industry
Why did GST not have a positive impact on Real Estate? Or, why it is not tax-neutral for housing?
- GST doesn’t eliminate multiple taxes on housing. It is just replacing the service tax and does not include other taxes
- Developers have to wait for the completion of projects and have to depend on the contractors for final prices calculation
- Not possible to check whether developers are sharing the benefits of input tax credit with buyers or not
- The gap between service tax and GST regimes can be too huge to be bridged with input tax credits
- Higher taxes on inputs can increase the prices
Even if the buyers receive a profit of input tax credits, the property prices may still increase by 1-3 per cent. Hence, the objective of being tax-neutral in the Real Estate Industry, of GST, seems to have failed.