The Goods and Services Tax (GST) has had a revolutionary impact on the economic condition in India. Simply because it has been able to eliminate the cascading taxation structures which have created problems for several industries in the past decade or so. If you had trouble understanding the implication of GST seek the help of CA firms in Chennai or other firms in different parts of the country.
GST attempts to change the economic structure of the country making it into “One Nation, One Market, One Tax” principle, and it signifies that India’s real estate sector will also experience this impact.
The real estate sector is one of the most important sectors of Indian economy. It follows close in the heels of agriculture, which contributes to a neat 5-6 percent to the GDP, this contribution is set to flourish at a compounded annual growth rate (CAGR) of 30 percent over the next decade. The sector is expected to generate a staggering $180 billion in revenues by 2020. Get the help of a chartered account in Chennai or any other city to get a lowdown on the changing economic space of the country, thanks to GST.
The real estate industry has been embroiled in disputes of all kinds in the past due to ambivalence in the provisions of multiple taxations. GST is expected to change all that with the taxation compliance and have a favorable impact on the industry.
GST For Real Estate Sector
GST brings some amount of transparency in the real estate sector and reduce the chances of unscrupulous transactions. GST law will help increase the margin in the hands of the contractor or the developer by removing some of the taxes such as VAT and Service tax which are charged by different contractors and entry tax, excise duty, octroi and so on.
Real estate sector enjoys a host of benefits from facilities in SEZ and these benefits are expected to be carried forward in GST. GST is hoped to fill the overwhelming gaps, which exists under the supply chain management process.
GST rate on Real Estate
The sale of land and buildings although currently kept out of the ambit of GST but will soon be taxed within a time- period of a year. The rates declared for cement, bricks, and iron will benefit the construction of land and building, under GST.
Cement is expected to be taxed at the rate of 28%, under the GST regime. It is slightly higher than the current average rate of tax which is around 23-24% but a number of additional taxes charged over the average rate would be subsumed under the GST law. Also, Iron rods and pillars, which are amply used in the building constructions is charged at the rate of 18%, which is not much different from the current average rate of 19.5%.
Bricks, also used in the construction of buildings and houses are taxed at 28% under GST but the rate of ceramic building bricks is slightly lower at 5%. Currently, barring the ceramic bricks, all other bricks are charged at an average tax rate of 25-26% inclusive of all state and central level taxes. The subsuming and streamlining of taxes will ensure the better logistics of transportation taxes.
Currently, in real estate sector, the situation is shrouded in ambiguity as a majority of each project expenditure remains unrecorded on the books. GST will slash down this percentage because of cloud storing of invoicing. Real estate sector will subsequently benefit with new tax law ensuring a positive effect on all the ancillary industries.
Though the impact of GST on real estate won’t be huge, what deserves attention over here is the transparency and accountability that GST will bring to the table. The Contractors would reap the benefit of the taxes which will be then subsumed by GST.