What will be effect of GST on Real Estate market?

Rahul More,

24th July 2017

Property Tax in Mumbai

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gst impact on real estate

gst impact on under construction properties

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Apart from that, currently in the real estate sector when a house is bought by the consumer, they pay service tax of 4.5 per cent. Under GST regime, the real estate sector has been put under 12 per cent bracket. This means that instead of paying 4.5 per cent tax, the consumer will have to pay 12 per cent which means a rise of 7.5 per cent. The consumers who do not pay the whole amount together and choose the option of paying it in monthly instalment also pay service tax. This will also get converted to GST.

Nikhil Agarwal, Delhi

26th July 2017

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I am agree with you Praveen. The actual GST rate on under-construction properties is 18 per cent. However, the effective tax on such properties would be 12 per cent as under the new regime developers will be allowed input tax credits.

Shantanu Kumar, Mumbai

26th July 2017

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For your kind information, landlords too have nothing to worry about GST on rent. Those who are earning a rental income by letting out their properties for residential use will not be taxed under the GST. However, those who have given their premises on rent to be used for commercial or industrial purposes will have to pay an 18 per cent tax in case they are earning over Rs 20 lakh annually.

Praveen Modi, Mumbai

26th July 2017

Hi,
I have paid service tax, VAT and 10% flat amount to builder and also registration done before the GST implemented. Do i need to pay again 12% GST Tax? Kindly reply?

Rahul Kumar, Delhi

26th July 2017

Comment

Hi Rahul,
If you already paid VAT and Service Tax for the property, you will not have to pay GST. But if you have pending VAT or Service tax then you will have to pay GST instead of the indirect charges.

Praveen Modi, Mumbai

26th July 2017

As far as my knowledge is concerned, buyers of under construction properties are unlikely to be burdened with additional tax burden on account of GST roll out. But final impact on property prices will differ from one state to another. Since VAT is a state tax, the exact effect of its replacement with GST will differ across the country.

Shantanu Kumar, Mumbai

26th July 2017

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But at the same time possibility of lower construction costs on account of input credit could lower the property prices if developer pass on the benefits to end users. This will be the further supported by the anti-profiteering clause which further urges developer to share the benefits derived from GST with the buyers via proportionate reduction in prices.

Praveen Modi, Mumbai

26th July 2017

Hi Rahul,
The Goods and Service Tax Council has included works contracts between realty developers and service provider under 20 percent slab. This move brought under construction properties under the GST Regime while ready-to-move properties still remain out of the new tax system brackets.

Vinay Sharma, Pune

26th July 2017

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