Home buyers who purchase a best property in India after the introduction of the GST are unlikely to suffer from any additional tax burden than are buyers who purchase a house before the GST is introduced. The GST will have a partial impact on the price of property in the country as work contracts in India will be levied a tax rate of 12 percent. According to experts, the 12 percent tax rate levied on work contracts under the GST will not have any impact on the price of houses in India.
Indirect Taxes on Real Estate
Currently, three key indirect taxes are levied on houses in India. These are excise duty; value added tax, and service tax which total between 9 to 11 percent of the price of the property. Stamp duty is an additional tax yet being a state tax, its rate varies from state to state. The first three taxes mentioned will be combined into one single indirect tax under the GST regime. One of the key strengths of the GST is that it will lead to the removal of cascading taxes. Under the new GST regime, builders will be allowed input tax credit which will lower the taxes they pay. However, developers in India are still waiting for clarity from the authorities on the abatement rate they will be charged on the land they purchase for a project.
How GST Will Impact Real Estate
Excluding taxes paid as stamp duty, realestate in India is currently taxed at rates lying between 9 and 11 percent. As the GST is expected to tax property at a rate of 12 percent, after the GST comes into force, houses are unlikely to cost more than they do today. According to leading property websites in India, the price of houses post the GST rollout is unlikely to rise.
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The Goods and Services Tax is also expected to widen the government’s tax collection base because, under the GST, the entire industry will be awarded an input tax credit. Authorities believe that awarding the entire industry with an input tax credit will provide a strong incentive to builders to come under the government’s tax net. Furthermore, as more businesses and traders come under the government’s tax net, it will lower the amount of cash in the country’s economy.
Benefits of Buying Under Construction Property Today
Home buyers interested in buying a house will benefit from buying property that is still being built today because after the GST regime is implemented, the property is likely to cost less. This is so because builders are constructing properties today, which when they sell, they will be able to receive a tax credit on under the GST regime. According to this property website, once the GST is in place builders shall receive a tax credit because excise tax and central sales tax on construction materials will be offset against indirect taxes collected from homebuyers.
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