To eliminate the cascading tax structure and reduce the additional tax burdens on consumers, GST based on the philosophy ‘One Nation, One Tax’ was introduced on July 1, 2017 which not only created uniform tax rates but also incorporated various taxes like central excise duty, commercial tax, octroi tax/charges, Value-Added Tax (VAT) and service tax into one.
The government also made the provision for Input Tax Credit so that the benefit can be passed on to the customers and the end consumers only bear the GST that the last in the supply chain charged. To make sure of this, the government added the anti-profiteering clause in the GST Bill under Section 171 of GST Law.
In the area of residential real estate earlier the service tax was charged at the rate of 4.5% but now after the introduction of GST, the tax will be levied at the rate of 12%, however, with no other hidden and cascading taxes. Along with this, the developers will also be able to avail several tax credits which according to experts will make the real estate projects launched post July 1st, cheaper than the ones launched pre-GST roll out in addition to increasing the profit margin for them. However, the 8% stamp duty that was being levied earlier during the registration of the house would still continue to be levied.
The developers whose projects are under-construction or nearing completion or ones that are not ready, won’t be able to avail the tax credits. Earlier, developers were offering many lucrative pre-GST offers and discounts, but these were allegedly believed to be ways for builders to stash money and clear dues in addition to reducing the inventory and therefore the consumers were warned against this move.
In order to ensure that the developers do not snatch the benefit of GST from the consumers, U/S 171 of the GST Act, an anti-profiteering clause was introduced to ensure that the benefits of tax credits being claimed by the developers can be passed on to the end consumers.
Some experts are of the view that the multi-faceted GST may have such an impact on Real Estate that would escalate the costs of the projects post-GST. Confusion persists and experts are divided on this. There is still much debate about the impact of GST on different types of housing say luxury and affordable.
Coming to the people who have rented out their premises, good news for them as their rental income will be exempted under GST however if the premises have been let out for commercial or industrial purposes and the income exceeds ₹20 Lakhs then GST will be levied.