How Does The GST Affect Real Estate?
The real estate sector is one of the most impactful sectors in the Indian economy, accounting for about 5% of the country’s GDP. Now, with the GST Bill being passed on March 29, 2017, let us take a look at how it will impact this sector, post-implementation.
It is being said that the Goods and Services Tax will replace several taxes, cesses and surcharges – Which will also affect the real estate sector. The GST is touted to ease the ambiguity surrounding our taxation system because it’s one, unified tax for all goods and services.
The exact effect on real estate, however, isn’t very clear. It has been pointed out that as the government promotes a cashless economy, encouraging the purchase of properties using institutional finance, so will the GST on EMIs for under-construction impact home-buyers?
The latest version of the GST Bill states that leasing a residential or commercial property is considered to be a service provided. (Presently, residential developments are exempted.) Experts say that if developers are willing to pass on the benefits to the end users, they could by lowering costs on account of input credit allowance. This will save the consumer a sum of about 20%.
Summarising GST’s impact on real estate:
- Under-construction homes to attract GST
- Leasing & renting of land and building, including residential, will attract GST
- It will be levied on EMI of under-construction property
- Tenancy and leasing would be considered as rendering a service
- Real estate to come under the GST ambit within one year of roll-out
That said, GST is expected to add about 2% to India's GDP. So of course, if the economy does well, there will be more demand for real estate, which will further boost the sector.