The implementation of The Goods and Services Tax (GST) is one of the largest indirect tax reforms in the Country. The aim of the GST sis to simplify the multiple levels of taxation with a view to create a unified market. The GST Council has currently recommended a four-tier tax structure of 5, 12, 18 and 28%.

Will the under-construction properties be costlier than ready-to-move-in properties?

It has been slated that under construction properties or residential construction services, will be subject to as effective 12% GST rate, applicable to developers selling residential units prior to the completion of construction to home buyers. Stamp duty will be levied in addition to GST on these transactions. Currently, with the exception of stamp duty, buyers need to pay several indirect taxes such as excise duty, value-added tax and service tax.

What will be the overall increase or decrease in property prices, once the GST is implemented?

Real estate builders will now receive the benefit of input credits on materials such as steel, cement, sand, which will be deducted from tax liabilities. It has been anticipated by the Government that builders will transfer these benefits onto the end consumer by way of price reduction/instalments with a view to boost consumer demand in a tepid sales environment. The government in a recent statement has alluded to using ‘anti-profiteering’ rules in line with the Directorate General of Safeguards (DGS) stipulations, as a deterrent to ensure builders transfer these benefits to the end consumer. It is, however, in the interest of the sector as a whole to maximize consumer demand and encourage purchase activity.

What would be the impact of the GST on property rentals?

GST has been levied to the tune of 18% for leasing commercial properties. Experts have clarified that the threshold limit for the applicability of GST has been increased from Rs.10 lakhs to Rs.20 lakhs. Hence, some of the landlords that came within the purview of the service tax regime, may not be included under the tax net of the GST.

Will the EMIs on home loan be affected, due to the GST?

GST is slated to be applicable on financial services at an 18% rate. Hence, loan processing charges are expected to increase in the GST regime.

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