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 Pricing
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
The Goods and Services Tax (GST), a revolutionary tax reform rolled out in July 2017, has effectively replaced the previous Gordian Knot of multiple taxes like VAT, central excise duty, commercial tax, service tax, octroi, etc.
It has made India a ‘tax-neutral’ nation – and while it evoked a response best described as ‘mixed’ from real estate buyers, most of them are in favour of it.
This is natural, as the unitary tax compliance system has simplified the homebuying process – and with the passage of Input Tax Credit (ITC), there may not be a significant additional burden to buying a home.
Homebuyers in the affordable housing segment – specifically homes of up to 60 sq.m carpet area in size – have benefited significantly from the reduction of GST by 4% (from 12% to 8%).
However, even almost a year after GST implementation, the only real clarity that exists for property buyers is on the prevailing GST rate of 12% on under-construction projects.
There is still confusion about the amount of rebate that a prospective homebuyer is entitled to on the back of the pass-over of ITC.