Goods and Service Tax (GST) is all set to be applicable from the 1st of July. The government is taking this move to make a transparent taxing system on sales, manufacturing and consumption of goods and services across the nation. GST is expected to bring together state economies and improve overall economic growth of the nation. On the other hand, GST on real estate is making quite a news for various reasons. Click here to know other details about GST.
The central and the state government have planned to impose GST on services and goods that are produced, manufactured and imported in India. Exports have been exempted from the taxing system. If talking about the real estate sector, GST may bring a lot of relief. The real estate supply chain will be revamped after implementation of GST.
The real estate sector is the second most important sector after agriculture in the Indian economy. This sector contributes an average 5-6% GDP contribution and prompts demand for more than 250 secondary industries.
How will Real Estate Sector benefit from GST?
First and foremost, GST would make this sector transparent and impose limitations on devious transactions. Under the GST system, fixed rate is levied on property – VAT and service tax will now be removed and a total of 12% will be charged.
GST rate on Real Estate
At present, the sale of land and buildings has been kept out of the range of GST but it is expected to be taxed within a year. Construction of land and building will benefit from the rates declared for cement, bricks, and iron under GST.
Cement will be taxed at the rate of 28% under GST. The current average rate of tax is 23-24 % ad under the new GST it will increase by 4-5%, also a lot of additional taxes charged over the average rate would be subsumed under GST. 18 % tax is charged on iron rods and pillars used in the construction of buildings, which is charged at 19.5% as of now.
Real estate sector reportedly has a huge percentage of expenditure that goes unrecorded in the account books. Real estate sector is said to benefit with this new tax law.
If looking at the long term effect on real estate, it is just going to get better with time. There is going to be a substantial benefit from GST as it will bring a lot of required clarity and answerability and make the dealing all the more transparent.