GST will be effective from July 1, 2017 and there are many things businesses and consumers want to know about the impact of its implication. Most of the debates on television turn out to be a blame game and nothing concrete is being conveyed to the people, here are some facts you must know about GST in real estate.
Buying a property in Bangalore or any other metro is undoubtedly a dream of many, but choosing to buy luxury villas, villa plots or under construction properties is something that brings a lot of thoughts in mind. So if you are the one looking to buy a property, here’s what you should know about the impact of GST in real estate.
- Lower Property Rates
Lowering down the cost on the input credit will be favourable for home buyers, as the property rates will come down. When the GST will be implied, the tax will be much higher for the home buyers and there are chances that home buyers will have to suffer higher tax rates. But the benefits of these implications include lower property price as well. Here, the homebuyers must understand that the benefits will be limited to the cases where the real estate developer will pass the benefits to their customers.
- GST On EMIs of Under-construction Properties
Experts say that there will be two most powerful aspects of GST playing major role in the real estate sector. The price being the most discussed factors, as everyone is expecting the property rates to come down and the second is the land value abatement in the total value of under construction properties and residential properties.
- Residential Properties
If you look at the current service tax scenario, you will find that the service tax is not applicable on the residential properties. At present, only the industrial and commercial properties are subject to service tax. These taxes will be replaced by Central and State GST. According to the government, there will be no change in the stamp duty.
- Sale of properties
One the GST comes into action, the tax rate scenario for the sale of properties will be different. According to the GST bill, the land or a building when sold will not be treated as a supply of services and supply of goods. Under construction buildings will be an exception in such cases. Overall, selling a land or building will not be considered the supply of goods or services and tax will not be levied on these activities.
- Renting Out
The Central GST bill states that the any lease or license, tenancy will be considered as supply of services and tax will be applicable on the same. According to the bill, renting out a place that include residential, commercial and industrial building or complex for any sort of business activities regardless of whether it is given out entirely or partly will be under the tax radar. The same will be considered as the supply of service and as per the CGST bill, tax will be applicable in such cases.