The GST’s Consumer Friendly Stance Will Aid Sales of Property in India

GST’s impact upon property in India can be judged from the words of the countries former finance minister who ten years ago stated that there would be a single and low tax rate across India after the GST took effect. Emphasizing that the tax rate under the GST would be low was key to the popularity in India of the new tax regime.  Real estate in India is expected to benefit from a higher yet uniform tax rate for real estate under the GST, which is also expected to make the GST popular among homebuyers.

residential projects in india
residential projects in india

GST Will Clear the Cobwebs

Buyers purchasing ready to move in properties will not feel the impact of the GST as they shall be free from paying any indirect taxes as per the GST regime. Homebuyers who purchase property that is under construction shall need to pay a Value Added Tax (VAT) and a Service Tax. The VAT differs between different states and the Service Tax is a uniform central tax that is pegged at 15 percent.

Taxes paid today by homebuyers are already quite high yet are extremely difficult to understand and navigate through even with the help of professionals. Many of those who buy properties in India visit real estate sites to compare the prices of different properties before deciding on one particular house. However they do not realize how much extra they would have to pay due to the myriad of taxes that would be levied on them as per the existing tax regime. Once the GST is in place, homebuyers will have perfect clarity regarding how much tax they would be required to pay for a property they are interested in buying.

Checking Builders

Homebuyers, who visit property sites in India have little information provided to them concerning how much of the expenses they have to pay have been passed on to them, by builders, because of the current tax regime, namely VAT. As the builder pays for goods produced along the entire value chain it is attractive for the builder to pass on his expenses to consumers and the VAT makes it difficult for homebuyers to ascertain how much extra they are paying for their house. To try and gain an understanding of how much extra they are being charged for their property by a builder who is passing on expenses incurred due to VAT to consumers, the only means available to a homebuyer is to rely on clauses of the sale agreements with builders. Yet these are usually very difficult to understand.

How GST Trumps VAT

Rather than doing research online on a real estate website to understand how much tax is being paid under the current regime, once the GST is implemented buyers will welcome the new found clarity they have been granted by the GST and no longer fear buying using information provided on a real estate website as they could easily calculate the amount of tax they would pay on any property they choose to buy.



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