The overall tax burden on property buyers may not increase after the rollout of the Goods and Services Tax (GST) in case of under-construction projects according to officials from leading property consulting firm Knight Frank. Many felt that in the GST regime, with the 12% GST rate in place, the tax burden would increase from 5.5% in service tax and VAT previously.
According to the Chief Economist and National Director (Research) at Knight Frank India, Samantak Das, the firm expects that tax burden will not increase for buyers in case of under-construction properties in the GST regime. With the 12% GST there is a difference of around 6.5% on the tax rates as compared to the earlier rate of 5.5%. However, several efficiencies have been introduced through GST according to him. Developers are working out the input tax credit that will be passed on to them in this new indirect tax regime according to Das.
Das added that the company has held discussions with developers and realty players are trying their very best to refrain from passing on any extra taxation burden onto property buyers. It is also expected that there will be no extra impact on homebuyers with GST implementation according to him. Das also stated that developers were aware that passing on extra tax burden to buyers could lead to a further decline in overall property sales.
In case of new projects, base prices would undergo revision so that price value of homes remains the same as before even after the GST rollout according to Das. Das made this statement at the launch of the India Real Estate-Residential and Office Report. Knight Frank India also confirmed that new launches have gone down by a whopping 41% in India, which is the lowest in the last 7 years over the first 6 months of 2017. This decline covers the top eight Indian cities of Mumbai, Hyderabad, Pune, Chennai, Kolkata, Bangalore, Ahmedabad and the Delhi-National Capital Region (NCR).
According to the report, sales volumes for property have also come down by around 11% (year-on-year) for the first half of 2017.