GST on Property 18%, 7 things to Know about GST on Property
GST on Property, in an event ‘Real Estate- The RERA and GST Era’ was recently organised by Magicbricks in New Delhi. As a revolutionary tax regime since independence the Goods & Services Tax (GST) is likely to eliminate the complex tax structure.
As a single indirect tax structure regime, it is expected to make tax collection seamless across India. 18% GST rate has been fixed by the Government for under-constructed properties with full Input Tax Credits (ITC) for the real estate sector but excluding the cost of land. Here are 7 things that should be known about GST on Property;
Real Estate will be Taxed at 18 %
The under-construction properties will be taxed at 18% which includes 9% SGST plus 9% CGST. The government has also allowed deduction of land value equivalent to one-third of the total amount charged by a developer, thus, making the effective tax rate as 12%.
Stamp Duty and Property Tax to eventually be subsumed
As of now stamp duty and registration charges are not included in GST because these are State and Municipal levies. Although the government says that it has plans to eventually subsume these levies into GST, when and how it will be done is yet to be seen.
Detailed returns need not be filed this year
The detailed return need not be filed by traders/businessmen only a summary return would suffice.
Teething issues inevitable
Teething issues, inflationary pressures and certain short-term adverse impact will make compliance difficult in the first 12-15 months.
Easier Redressal of Taxation Issues
Seeking redressal of a taxation issue would be far easier because in the new regime the same rule would apply to everyone.
Transition period a pain for Developers, Consumers
Making Real Estate transactions in the transition period will lead to inexactness on how will ITC be calculated when the new law kicks in.
Unregistered vendors will be a headache
Any purchase from an unregistered dealer will attract a reverse charge on the recipient which adds to the compliance cost of the purchaser.