Being pegged as a revolutionary tax reform since Independence, the Goods and Services Tax+ (GST) is likely to eliminate the complex and ambiguous tax structure plaguing the country currently. To bridge the gap between the government, developers and consumers, Magicbricks organised an event ‘Real Estate – The RERA and GST Era’ in New Delhi recently.
A single indirect tax-structure regime+ , the move is expected to make tax collection seamless across India. With the Union government fixing 18% GST rate for under-construction properties with full Input Tax Credits (ITC) for the real estatesector but excluding the cost of land, here is a list of key takeaways from the new law:
Real estate will be taxed at 18%:
Under revised order from the government, under-construction properties will be taxed at 18% which includes 9% SGST plus 9% CGST. The government has also allowed deduction of land value equivalent to one-third of the total amount charged by a developer, thus, making the effective tax rate as 12%. “However, in the new regime the quantum of ITC will be higher though overflow of credit is restricted. The price of a property is an outcome of demand and supply dynamics, not taxes alone,” says S Satish, executive director, RSM Astute Consulting Group. “Imposing GST on land would have just resulted in land costs rising further at a time when the government is pushing its agenda of affordable housing nationally,” adds Ramesh Nair, CEO & Country Head, JLL India.
Stamp duty and property tax to eventually be subsumed:
Stamp duty and registration charges are outside the ambit of GST now because these are state levies while property tax is a municipal levy. “In many countries where GST has been implemented, it includes immovable properties as well,” says Satish. Although the government says that it has plans to eventually subsume these levies into GST, when and how it will be done is yet to be seen.
Detailed returns need not be filed this year:
KPMG Partner (Indirect Tax) Priyajit Ghosh says that the new law was a challenge on the compliance front and the government has agreed to take a lenient view for the first couple of months. “The government has said that a detailed return need not be filed by traders/businessmen only a summary return would suffice,” said Ghosh. Satish adds that returns can be filed in summary but individual transactions have to be uploaded in the system.
Teething issues inevitable:
Deepak Kapoor of Gulshan Homez said multiplicity of rates in the previous regime had created a lot of confusion. “Teething issues, inflationary pressures and certain short-term adverse impact will make compliance difficult in the first 12-15 months. But global precedence says that GST has been beneficial,” adds Tina Rakyan, director (Finance), Hines India.
Post-GST, some tax issues will become easier to handle as there would be no overlapping jurisdiction between the Centre and states with regards to levies on services and goods. “Seeking redressal of a taxation issue would be far easier because in the new regime the same rule would apply to everyone,” explains Ghosh. However, Satish adds that new issues related to classification, composite and mixed supplies, ITC etc can crop up.
Transition period a pain for developers, consumers.
Source : http://timesofindia.indiatimes.com/business/india-business/gst-on-property-7-things-you-should-know/articleshow/59501923.cms