Touted as the country’s biggest tax reform, GST will replace a range of existing local and state taxes. The industry stakeholders are highly optimistic that it will reduce the heavy tax burden which may result into benefits for both developers and buyers. Hence demand in the market will grow. However, currently the industry veterans are keeping their fingers crossed for the favourable final rate of GST. GST is expected to replace the currently applicable multiple taxes such as value added tax (VAT), custom duties, central sales tax (CST), excise duty and service tax, etc with a
single tax and hence there will be visible reduction in the initial cost incurred for the production and supply of goods and services.
The benefits of the uniform tax rate across the country shall surely be passed on to the customers in
the form of reduced prices of the products and services and this scenario will also reignite the demand in the market.
With the introduction of GST Act, the overall business operation cost is expected to be cut down by minimum 5% to 10% which will considerably reduce the prices of the finished products and services that will also include the cost
of manufactured houses. However, it will largely depend on the final rate of GST to enable the actual benefits to reach the consumers once GST Act is implemented. If the GST rate remains below the overall taxes in force currently, it will be beneficial; otherwise, it may turn out as a real dampener.GST will create a favourable situation for the industries to flourish and simultaneously affordable housing is expected to get tax exemption under GST. Uniform tax rate across the country will also enable the companies to set-up multiple warehouses and production
set-ups in different states. Thus transportation cost incurred by the companies will also come down significantly. Apart from helping in building hassle-free supply network, the upcoming GST regime will also improve the ease of doing business due to uniformity in tax structure. All industries are expected to grow due to the free movement of manufactured goods in the unified market across the country. Thus the upcoming GST regime may bring in a win-win situation for all.
“The Goods and Services Tax is likely to be a game changer for the real estate industry, which is currently facing issues of multiple taxation amounting to over 25 percent in indirect taxes. With the uniform tax, developers will
have free input credits on GST paid for services and goods purchased by them which will reduce cost and can be passed as reduction to buyers. It will benefit real estate sector by ensuring a uniform tax structure and improve
tax compliance by developers. It may bring in greater transparency for the sector and may minimize unscrupulous transactions. GST will have a cascading effect for the homebuyers, as developers with more margins in their hands
will be able to restructure the cost of the products in favour of consumers,” said Brotin Banerjee, MD & CEO, Tata Housing. Arjunpreet Singh Sahni, Executive Director, Solitarian Group observed, “GST is all set to bring economic revolution in India by providing greater relief to the industries from the complex tax system. So the approval of GST
Bill is undoubtedly a step towards greater progress and growth that will surely lead to a considerable increase in the GDP of the country.” Going forward, with the introduction of the new law, businesses will be motivated by the
uniform tax structure. “Among other industries, the real estate sector will also be immensely benefitted by the Act which will enable the real estate companies to do hassle free business across the country on the back of uniform indirect tax throughout the country on various construction materials including the steel and cement, costs of which become major deciding factor while finalizing the price of the finished products,” added Sahni.
“The GST would have been more homebuyers’ friendly if stamp duty had also been subsumed into it. Still, in a nutshell, GST is here to transform the growth prospects of the real estate sector by bringing more transparency
and the long prevailing gloom of slow demand may soon lift away,” he further added. Pankaj Kumar Jain, Director, KW Group, said “Eliminating the threat of double taxation, GST Act is soon to emerge as one of the major reliefs for all the stakeholders of the real estate sector. The home buyers are also set to cash in on the major benefits that a unified tax regime across the country is expected to offer them. Creating an environment of greater transparency
and ease of doing business, the impact of GST will be felt in the form of increased business momentum in real estate sector for sure.” The rolling out of the GST will stay take some time, maybe up to a year to take care of any problems that arise in implementation. Hence, actual benefits for final consumers / buyers and the overall positive impact on the economy may take longer to get manifested,” added Anshul Jain, Managing Director, Cushman & Wakefield- India.
“The implementation of GST Bill will aid in broadening the coverage of tax base, infusing transparency and also removing the present unhealthy competition among different states. We are optimistic that new GST rates if kept
rational would bring down the property prices due to lower input costs and as a result demand is expected to grow in near future. However, exclusion of stamp duty charges from the GST is a setback as home buyers will have to pay stamp duty too other than GST,” said Deepak Kapoor, President, CREDAI Western U.P & Director, Gulshan Homz.
Manoj Gaur, President CREDAI-NCR & MD, Gaursons India said, “A well-defined GST implemented for the country will bring about a relief for this sector and its customers. Commercial realty players will be hugely benefited as all the lost Cenvat credit, which is in current regime a cost to commercial developer can be availed if GST is applied in a free flow manner that will also help in reducing costs. A much simplified single tax rate, reduced construction
costs and better transparency in the sector will be much welcomed by the developers and customers.” Deepak Kapoor added, “We are predicting a nationwide realty sector growth by almost 15-20 percent projected in the course of next 5-7 years. Demand is bound to increase due to reducing costs and improving transparency in the sector that has been the hurdle making this sector suffer for long now.” “A single tax rate across the country will promote fair practices which will further encourage transparency and less evasion in the sector that supports future growth of demand for real estate. With the dawn of concepts like hustling in service tax coupled with reductions and various mandatory charges collected by developers these days, the need of having a same tax base can be only answered by GST,” added Ashok Gupta, CMD, Ajnara India Ltd Zafar Akbar, Chairperson, Exalter Group said “Real Estate sector will be highly benefited with the passage of GST bill as it will be a solution to a sector full of complexes and concerns.
The different indirect taxes would be amalgamated into one tax easing the process of taxation considerably both for developers as well as home buyers. It is anticipated that under the GST system, there would be an even flow of
credit and current restrictions on construction related credits are expected to be removed as well. Commercial properties are going to get huge benefits with this move as no credit is available on construction of developing a commercial property.”
“Currently, the homebuyers are under the pressure of two forms of taxes; service tax and VAT on the purchase of residential units when booked prior to its completion. There are numerous components of non-creditable tax
costs such as CST, entry tax, customs duty, excise duty, etc. which is duly paid by the developer on its procurement side which are basically ingredients for the cost pricing of the units, added Dhiraj Jain, Director, Mahagun Group.
Meanwhile, Kushagr Ansal, Director, Ansal Housing pointed out, “There are developers and builders who are constructing projects in different states, specially tier-2 cities and thus have to abide by the state specific VAT laws, service tax and corresponding compliances. The presence of several indirect tax components faced by the
developers at present are a major cause that bring tax inefficiency in this sector. A simplified tax structure would also mean that property prices would come down considerably enabling better affordability for people looking for property options in tier 2 and 3 cities.” For the Indian economy, the GST will create an extremely positive scenario in which indirect tax evasion will come to an end and thus a considerable increase in the country’s GDP will also be witnessed sooner or later.