After the enactment of RERA it is time for the GST to come into action. Finally the government has decided to keep the GST rate to be 12% on the work contracts. Though the rate seems to be a high one but actually it will be lower than 11% when taken on the whole. The GST is sure to have a big impact on the real estate as it will affect the prices of the construction materials like cement, steel etc. Initially the government had kept the tax rate to be 6% with the state levying 1-4.5% additional tax but now it will be common for the entire country thus keeping things stabilized.
The work contracts include both your residential as well as the commercial real estate projects. The tax will be levied on both and the builders will get the advantage of tax credit when they but manufacturing materials like cement etc. Earlier indirect taxes were imposed on such goods and was much higher but with GST the rate has definitely come down and a positive sign for the builders. Most of the people feel that 12% is too much but when you take everything into consideration it will come out to be much lower than other taxes and so the impact will be definitely be less.
GST is imposed only on the services and not on the goods as VAT is already imposed on them. In case any new item is needed to complete the construction, tax will be levied on it without any doubt. The main motive of introducing GST was to bring in simplification and also curb the wrong practices of the state charging higher tax from the builders. With GST such things will come to an end as there will be a much needed transparency that will make a difference to the real estate sector.
Apart from this, individual taxes have also been levied like for coal the rate has been fixed to 5% which is quite lower than the existing rate of 11.5%. Similarly for other components of construction too, the government has made an effort to lower the taxes thus giving them some kind of relief. So both RERA and GST together will change how real estate was moving as a lot of changes have been introduced. It is for the betterment of the builders and the buyers thus keeping everything balanced and under control.
Hope to see something great with GST.
Let’s wait and watch.. how it’s going to give an impact on Real Estate!