GST a sentiment Booster for the Real Estate Buyers

GST is expected to be a sentiment booster for the industry and will seek to revive buyer and investor interest by bringing more transparency in taxation. As the perception of the sector is said to have improved, the prices are likely to drop around one to three per cent if it all they do, according to a report by Edelweiss Securities.

The taxation earlier was too complicated for buyers. For instance, buyers were earlier liable to pay taxes depending on the construction status of the property and the state where it is located. Buyers also had to pay VAT, service tax, stamp duty and registration charges on purchase of an under-construction property. However, if the purchase was for a completed property, the tax applicable were stamp duty and registration charge. Furthermore, since VAT, stamp duty and registration charges were state levies, each state specified its own figures. Service tax was a central levy and was charged on construction. So the calculation of taxes was very tedious in the earlier regime. GST charges all under-construction properties at 12 per cent of the property value. This excludes stamp duty and registration charges. No indirect tax is applicable on sale of ready-to-move-in properties hence the tax will not apply to those. The biggest takeaway is that GST is a simple tax that applies to the overall purchase price.

A developer could take input credits on sale of under construction property against the taxes that are paid by the buyer. Earlier, VAT and service tax used to account for nearly nine per cent of the ticket price of the property. Since that will be lower than the GST applied to the sector, the builder will have to pass on the benefit of the price reduction to the buyer. The price reduction is on account of the input tax credits that the builder enjoys.

Inputs from Indian express

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UP RERA Rules Re Modiied in favour of the Buyers

Yogi government is doing away with pro-developer clauses that diluted the country’s first-ever law to clean up a sector beseiged with problems of delayed projects.

The new rules bring all ongoing projects where completion certificate was not issued on May 1, 2016  under its ambit.

The Samajwadi Party government had earlier changed the definition of ‘ongoing project’ to keep a majority of projects in cities such as Noida, Greater Noida and Ghaziabad out of the purview of the real estate regulator

Mahendra Bahadur Singh is heading a panel formed by the Yogi Adityanath government to rewrite the real estate regulation rules after consumers’ group met the Uttar Pradesh chief minister and told him that instead of homebuyers the rules were framed to favour the builders.

As per the Real Estate (Regulation and Development) Act, 2016, an ongoing project is basically a project “for which the completion certificate has not been issued as on May 1, 2016” on the date of commencement of the act. This basically ensures that many home projects which are work-in-process come under the act. However, four ‘exclusion’ clauses were added in the UP real estate rules 2016 during the Samajwadi Party’s regime to keep a majority of projects out of RERA. These ‘exclusion’ clauses have now been dropped.

Similarly, recommendations on fines and penalties on developers that were earlier watered down, now have been restored as provided in the Centre’s Act.

Other relaxations relating to 70% cap on funds to be utilised by the builder from the money taken from the home buyers have also been reincorporated as provided in the original.

It has also been  suggested that a committee, which should also have a representative of RERA, monitor all such expenses by the developer, said an official.