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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