Homebuyers could see a rise of 1-3 per cent in overall cost under the new indirect tax regime.
The goods and services tax (GST) has brought the real estate sector partially under its ambit by taxing works contracts at 12 per cent, exclusive of stamp duty.
“Under current service tax, with abatement rules, the effective service tax for under-construction properties is 4.5 per cent. Over this, states have value-added tax (VAT) of 3.5-4.5 per cent. The total is not more than 9.5 per cent in any state,” said Anuj Puri, chairman, Jones Lang Lasalle Residential (JLLR).
Currently, real estate taxation for residential properties works something like this: While service tax rate is 15 per cent (14.5 per cent plus 0.5 per cent Krishi Kalyan cess), developers get abatement on land and other services. This leads to an effective service tax rate of 4.5 per cent. In addition, VAT comes at 3-5 per cent, depending on the state. On an average, VAT is 4.5 per cent. A consumer has to pay service tax, VAT and stamp duty (differs across states). Under GST, there will be a flat 12 per cent plus stamp duty that the state levies.
In other words, for a Rs 1-crore property, a buyer would have to pay Rs 8-9 lakh as tax (without considering stamp duty). Under GST, he would have to pay a maximum of Rs 12 lakh. “If the developer’s payout under GST is higher, he might burden the buyers or pass on the benefit to them,” added Puri.
via Realty implications: Homebuyers may see some rise in prices after GST | Business Standard News
aniltikotekar4sme.com 