A GST rate cut on cement will reduce the overall cost of development - but will developers pass this benefit on to buyers?
Tag: GST Impact On Real Estate In India
Anuj Puri, Chairman – ANAROCK Property Consultants
The landmark reform of Goods & Services Tax (GST) was, in many ways, the final bullet shot to the Indian real estate sector in July 2017. The industry was already reeling under the immediate impact of DeMo and RERA.
GST was touted to be a gamechanger for all sectors including real estate. It was largely anticipated that GST will provide a much-needed respite to homebuyers by way of reduced property prices. Unfortunately, with GST completing one year, it emerges that these expectations were unrealistic.
While the tax-on-tax has been eliminated with the advent of GST, the overall outgo from homebuyers’ pockets seems to have increased by as much as 8% across cities. This ultimately reduces the demand in real estate.
Also, the higher tax rate on purchasing a home – an already staggering expense for most Indians – has kept many home buyers and investors off the market.
Let’s understand this better.
- In real time, the cost of raw materials under the GST regime underwent minor changes – cement, paints and plasters were taxed at 28%,
Anuj Puri, Chairman – ANAROCK Property Consultants Pvt. Ltd.
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.