Goods and Service Tax in India Real Estate

Indian Real estate sector provides for 5% of the GDP of India thus impact of GST is very important to be debated and understood in clear light. The growth of real estate in India has been phenomenal across metros, cities, towns and villages in past few decades. The sector is the second largest employment provider in the country. This sector is under scanner and regulations of the Government through varied bills and taxes. GST or Goods and Services Tax is one such development which will impact real estate industry in a positive way. GST is the single indirect tax levied covering all the goods and services in a sector by moderating the overall taxation levels in the sector as well as the country it is levied in.

Goods and Service Tax on India Real Estate

GST on Real Estate in India

The real estate in India has been going through different levies of taxes like VAT, taxes on transfer of development rights of land, taxability of joint development agreement , taxable value of goods and services etc which causes lot of confusion to the realtors as well as the buyers. GST is an one stop solution to the issues arising on the same The rules of GST are yet to be formulated on the complete form but certain aspects have been cleared on the way GST will be levied on the realty sector in India. The transfer of completed immovable property by sale transaction will be outside the jurisdiction of GST and will be liable for stamp duty. The GST will aid the real estate sector to wipe out the indirect taxes levied on the transactions conducted in the sector.
The present day confusion arises with the tax regime followed with two major taxes levied in the sector namely VAT and Services tax. These taxes are again overlapped by different tax regimes followed in different states like excise duty, custom duty, CST, entry tax etc. In this scenario GST if applied in the sector will regularize the tax scenario across the country on the same level. GST will impact the commercial property on a significant way where the property developers are burdened with higher costs with no credit on the construction available. GST will allow free flow of credit and the present restrictions on construction related credits will be offset and removed for ever. The SEZs will be neutral as the focus of GST is on the transparency through market mechanism. The expected rate of GST to be levied on real estate is 12% though not confirmed yet but will be a welcome rate by all the segments in the sector. Thus GST looks like a boon to the real estate sector but time will only provide the scenario whether it is a boon or a bane to the country at large.