What is the GST Impact on Real Estate in Mumbai?

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What is the GST Impact on Real Estate in Mumbai?

GST Impact on Real Estate in Mumbai

The GST bill has been the talk of the hour since it came into implementation. Despite the talks going around GST, people are still not sure about how it is going to affect them while making big financial decisions. GST as described by PM Narendra Modi, the goods and service tax has simplified the complex tax structure in India. The multitude of indirect taxes has been reduced to four tax rate slabs, i.e, 5%, 12%, 18% and 28%. This simplification of tax regime has impacted different sectors differently.

GST may bring a lot of relief to the real estate sector.  Supply chain mechanism in real estate sector is revamped after implementation of GST. Real estate sector plays a vital role in employment generation in India. The importance of Real estate sector can be understood with its average 5-6% GDP contribution and stimulating demand for more than 250 ancillary industries.

Also Read: Best Place to Invest In Property in Mumbai 2018

GST System for Real Estate Sector

GST would bring a lot of transparency in the real estate sector and minimize unscrupulous transactions. Under the current tax laws, VAT and Service tax charged by different Contractors and excise duty, entry tax, octroi is paid on the procurements. GST law will increase the margin in the hands of contractor/developer by removing all the above-mentioned taxes.

Will It Help Home Buyers in Mumbai?

To say the least, the Indian real estate sector has been going through a significant transformation in the recent times. The recently implemented Real Estate and Regulation Act (RERA) has already started addressing the issue of non-transparency and affixes a level of accountability on real estate builders and brokers which is unprecedented in the history of the Indian property sector.

Also read: What is the Impact of RERA on Real Estate Prices in Mumbai?

For the residential real estate sector in Mumbai, the implementation of GST will definitely be a positive sentiment booster among property buyers. GST may not be instrumental in bringing down the prices of the residential real estate over the short term. However, it will benefit all the stakeholders of the residential real estate sector, as the perception of the sector will improve on the back of a simplified tax structure and accountability being fixed at every stage.

Benefit to Property Buyers:

A simple and transparent tax applied on the purchase price is the biggest take- away for property buyers. Under the GST regime, all under-construction properties will be charged at 12% (excluding stamp duty and registration charges). It will not apply to completed and ready-to-move-in projects, as there are no indirect taxes applicable to the sale of such properties.  VAT (with rates differing from one state to another) and Service Tax together accounted for 7-9% of the ticket price for a residential property, which is 3-4% lower than the GST rate.

Any real estate product comprises of three expense components, namely land, material, and labour or service costs. VAT is calculated on material cost, and service tax is calculated on labour and service cost. It is very difficult for buyers to ascertain what components were included for calculation of VAT and service tax. The implementation of GST makes the calculation much simpler, since the buyer has to pay only a single Goods and Services Tax. Also, the builder must pass on the benefit of the price reduction he enjoys due to input tax credit to the buyer (a win-win situation!).

Impact on Affordable Housing:

The affordable housing sector, which is a major thrust area of the incumbent Government and is the cornerstone of its ‘Housing for all by 2022’ vision, will not be impacted by GST. This has been clarified by the announcement from the Finance Ministry, which indicates that there will be no tax under GST for housing projects which comes under the affordable housing scheme.

Concluding note…

The impact of GST on real estate sector is expected to be neutral under GST. Though still, there is going to be a substantial benefit from GST as it will bring a lot of required transparency and accountability. Developers/Contractors would reap the benefit of many taxes which will be subsumed by GST.

Good news! Avant Heritage is a GST-Free Project!

Avant Heritage exudes great architectural designing and indulging modern lifestyle. Located in the heart of Mumbai’s well-established suburb Jogeshwari Vikhroli Link Road – Western Express Highway, Avant heritage is easily approachable from Western Express Highway as well as JVLR. The 3 majestic towers of 23 floors each have 1/2/3/4 BHK & Duplex Penthouses located Next to Paras Nagar Jain Temple, offering you a grand experience.

Make the most of ‘NO GST’ and experience magnificent living with lots of comforts accessible in and around. Explore more at: www.avantinfra.com

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