Benefits aside, a cut could have been a major setback to the affordable housing segment
GST rate cut, clarity on / abolition of ITC – boosted demand vs. actual sales
After much anticipation, the GST Council has failed to deliver a final verdict on GST applicable on real estate – but how much would it really have mattered?
Here’s a Utopian vision – the government would announce a GST rate cut, homebuyers would cheer up since prices would reduce marginally, and the market revives. Really?
The biggest paradox in Indian real estate is that numbers suggest a massive burden of unsold housing stock in the midst of a chronic shortage of housing. As long as prices don’t reduce significantly, the housing shortage will only widen regardless of tax sops.
What we have today is a nation of aspiring homebuyers, many of which are perpetually on the fence, waiting for a slew of minor policy windfalls to cumulatively make a home purchase feasible and attractive.
The switchover to the GST regime is undoubtedly one of the biggest tax reforms in post-independence India. From July 1 2017, GST effectively cuts through a confounding Gordian knot of taxation complexity in the country.
In other words, it replaces the multiple taxes levied by the central and state governments and will become subsumed of all the indirect taxes, including central excise duty, commercial tax, octroi tax/charges, Value-Added Tax (VAT) and service tax.
The Goods and Services Tax (GST) is, beyond doubt, the most revolutionary tax-related reform to be seen in India in several decades, since it will eliminate the conflicting and cascading taxation structures which have confounded several industries over the past few decades. It will most certainly have a profound effect on India’s economic prospects.
A single indirect tax which covers all goods and services will, in the long run, increase tax collection by making it easier for retailers and several other businesses to comply and also moderate overall taxation levels.
That said, it should be remembered that the favourable effects of this new taxation regime will become evident only within 2-3 years of its implementation.