It is widely known that GST will be implemented by July 2017. This step along with RERA will be a major step to try to “boost” the real estate sector, which has been sluggish for many years now.
Let us look at GST’s impact on the Real estate market with a micro view on the residential group-housing sector
Short Term Impact
The impact on the short term will be dependent on the rate slab for Real Estate Sector. If, as widely predicted the real estate sector is subjected to GST at the 18% slab, it will translate to an approx. 1.5%-2% increase in cost for the buyers come July on projects that are nearing construction or are ready in phases.
Long Term Impact
Over the long term, GST is expected to lead to a simpler tax regime which is much needed in a sector plagued by a multitude of taxes like VAT, Service Tax, Stamp Duty, Registration Charges etc.
Buyers & Developers alike will welcome this step as it reduces uncertainty & ambiguity in the various taxation levels and increases the ease of doing business. Moreover the overall beneficial impact on our GDP growth will in directly boost demand in the real estate sector as well.
Also, in case the developers are allowed to receive input credits for the taxes paid for construction purposes, they may have some more margins that can be passed on to the buyers. However, that will only be the case in projects that are started after GST roll out and they effect will probably only be in seen after a 7-10 year time period. Moreover, it is still not clear whether such input credits will be allowed for real estate sector or not.
As stamp duty and registration charges have been kept out of the purview of GST, it can be said that the direct impact of this law on the affordability of group housing will be limited. It may have been a better step to include these into the purview of a single GST to be able to give a real boost to the group housing industry.