Real Estate GST may lead to Greater Transparency, Regulation: Analyst
Real Estate GST: Inclusion of real estate in the Goods and Services Tax (GST) regime may prove to be a positive move for consumers who will gain from greater transparency, more regulation of the sector and possibly lower price on purchase of new property.
Developers hoping for tax rate of up to 10%, there could be some price pressure, as the GST Council could consider two rates — 5% and 12 per cent for low-cost housing and other properties respectively.
GST rate on under-construction real estate projects stands at 18% currently. If this rate is also applied to the cost of land and on the sale of ready-to-move in homes, it will seriously impact buyer sentiment, said Chairman, Anarock Property Consultants. However, if the Council decides to lower the GST rate on real estate and subsume the cost of stamp duty and property registration, the adverse impact can be marginally mitigated.
Secretary, CREDAI– NCR, said if the GST Council subsumes the stamp duty and maintains a rate of about 5%, it would be positive for consumers. But if its revenue-centric, it could impact the sector.
Jammu & Kashmir and Delhi have for long been supporting the inclusion of real estate in GST, analysts warn that it could be a lengthy process requiring a number of legislative changes in the GST Act as well as amendment to the Constitution.
It is good that the government is thinking ahead and the debate on inclusion of the entire real estate sector has already begun. However, the legislative processes required to make it a reality will take time and the consensus-building process with States should begin soon.
Thirteenth Finance Commission, chaired by former Finance Secretary and one of the key proponents of GST, had also suggested including real estate under GST.
Real estate sector (both residential and commercial) should be included in the tax base and stamp duty levied by State Governments should be subsumed into GST, the report had said, while recommending a threshold of Rs 10 lakh to exempt small residential and business properties.
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