Here’s how the Implication of GST Will Help Home Buyers!
The Indian junta has been waiting patiently for a reformed tax system. Finally, after a decade-long delay, it was announced that Goods and Service Tax (GST) will be rolled out by April in the Union Budget 2017. Three states have formally consented to this bill and it seems other states will be following suit. Realty sector after demonetization faced a massive backlash with dipping prices and stagnation in business. The implication of GST will affect the property tax triumvirate, which in turn affects home buyers. Here’s what that will be changing:
Value-Added Tax: Some states like Maharashtra and Haryana require you to pay a VAT for under-construction properties. It’s usually 1% of the property’s cost, but in Karnataka, 5% VAT is charged. VAT is charged on the sale of goods.
Stamp duty: Stamp duty is raised as a tax on legal document registration. So naturally, when you register a property, you have to pay a certain amount.
Service Tax: Service tax is incorporated in the gross property price as a one-fourth of the original price.
VAT and service added tax will be replaced by GST. This will remove multiple taxations that can go up to 25% of the property cost. Purchasing an under-construction house will have you shell out 4.5% service tax and a state-dependent VAT. Replacement of both of these with the uniform GST will save the hassle of separate payments and over-paying of taxes. However, the catch is that GST will be profitable for home buyers only when it’s lower than VAT, stamp duty and service tax combined. Permanent reduction in the prices is imminent because the developer’s input costs will reduce. It will result in the fall of realty prices for sure. The implication of GST will prove to be a game-changer for both the consumers as well as the builders.