GST and Real Estate Update 2022, How will GST impact the real estate sector this year?
Due to its stringent compliance requirements, GST, which went into effect on July 1st 2017, has stressed out the majority of taxpayers and dealers. Industry analysts have varying opinions on how it will influence taxes in the real estate sector. The essay will attempt to highlight the relevant problems from the outset to aid in comprehending the various points of view.
In the previous tax system, the buyer was required to pay VAT, service tax, stamp duty, and registration fees when purchasing a property that was still being built. Only stamp duty and registration fees were due when purchasing real estate after it had been completed; VAT and service tax was not applicable.
As is well knowledge, the real estate sector ranks second in terms of employment creation in India, contributing 7.8% of the country’s GDP. The real estate industry’s problems will only be resolved by the passage of this tax bill, which will also aid the industry in emerging from its protracted hibernation.
Since the GST increases transparency in the real estate industry, the overall price rise for new residential homes may be less than for new commercial buildings. It will lower the price of buying a home for purchasers since under the previous tax system if a residential unit was reserved before it was finished, the buyer had to pay Service Tax and VAT, and the developer had to cover non-creditable tax costs including excise duty, customs duty, CST, and entry tax. Developers will benefit from input credits on GST paid for services and items they acquired thanks to the consistent tax rate, which will lower their costs and allow them to pass those savings along to customers.
When it comes to Value Added Tax (VAT), the tax system is now being simplified with the establishment of GST. After the introduction of GST, which will not include the cost of stamp duties.
All properties that are still under construction will be subject to a 5% GST without an input tax credit. However, properties that are ready for habitation will not be subject to GST. The real GST rate for this category is 18%. However, a third of this 18% is regarded as the value of the undivided portion of land that was given to the property buyer. As a result, the GST rate is reduced to 5% for residential and commercial projects that are still under construction and qualify for the full input tax credit. The affordable housing program covers a property’s carpet space up to 60 square meters in a metro region and 90 square meters in a non-metro area.
GST Rate that Applies to Affordable Housing Units
In order to satisfy the lower- and middle-class population’s housing needs, the Indian government (GOI) introduced its affordable housing strategy in June 2015. Common residential housing that is intended to be cost-effective is subject to reduced goods and service tax (GST), which provides assistance to those who can afford to buy a home at the time of purchase. In addition to knowing what an inexpensive property implies under the GST, home buyers just need to provide GST at the time of purchase, according to tax and investment experts.
GST Rates for Various Construction Materials
The construction business is subject to both taxes on goods and taxes on services, which are the two forms of GST on real estate in India. Taxes on goods are charged on the purchase of building materials, but taxes on services are levied on the actual construction service. For different goods and services, there are various charges that apply. These taxes add up to increase the owner’s overall building cost. The State GST (SGST) and Central GST (CGST) are added in equal amounts to determine the total amount of GST owed. Example: SGST + CGST Equals 18% of total GST. This is true for all GST rates.