With the announcement of taxation rates under the Goods & Services Tax (GST), there are varying forecasts for real estate India 2017. While the impact of GST on several market sectors is already known, industry analysts are still divided when it comes to the impact of the same on Indian real estate. On the surface, it seems that there will be a minimal or relatively neutral impact on the realty sector from the view of costs. However, the works contracts will be taxed at 12% and most of the construction materials will fall within the 18-28% tax slab. The availability of input tax credit could neutralize the total impact however.
As a result, much will depend on thorough implementation and the proper tax credit claims system. According to market experts, with RERA also being implemented, developers will have to focus on streamlining their entire operations and processes. There may be some initial teething problems but GST will boost India’s attraction to global investors as a major destination for big ticket investments courtesy higher transparency and ease of operations in all property dealings. It is not known yet whether prices in commercial and residential segments will witness a cooling effect due to GST. Greater clarity is expected on the issue in the near future. It is still unclear as to what will be abatement provided for land cost with regard to calculation of service tax for projects which are under construction.
Several goods connected to the industry will fall within the 18-28% tax bracket but there is still clarity sought on tax slabs for services. In the long run, the implementation of GST will boost the Indian real estate sector hugely due to the removal of multiple federal taxation barriers and the creation of a common market for enhancing supply chain efficiency and drawing more FDI into the country itself.
GST will bring more transparency to property markets and will offer a solution for checks and audits for enhanced quality control and monitoring. Home buyers will have higher empowerment when it comes to decision making and can make informed moves as a result. GST will free consumers from the issues of paying multiple state taxes at various levels and this will remove the impact of double taxation in several cases. The implementation of GST will benefit NRIs who wish to invest in real estate in the country through a single channel which is all inclusive. GST will add up nicely to the Government’s push for affordable housing with several schemes tailored for this purpose. Buying a home will become easier since benefits will now be given to both end-consumers and developers according to market experts.