Updated | July 2, 2017 11:20 IST
Prime Minister, Narendra Modi and President, Pranab Mukherjee has launched the most prestigious tax regime of India, GST on yesterday midnight.
The Central government has raised the tax per cent from 12% to 18%. But the GST rate is effective on under-construction projects is 12 percent, not 18 because it removed the land value from the computation of tax liability.
The GST Council which heard the plea of developers have decided to levy 12% GST on the construction of apartments, complex building, civil structure etc., which is intended for sale to a buyer, wholly or partly. On 12% GST, CREDAI President, Jaxay Shah said that the effective GST rate would remain at 12 percent and the developers would pass on the benefits of input tax credit to buyers.
In the past, land cost also included but now it is abated. The confusion has increased, post the government has announced that 18% GST on under-construction projects instead of 12 %. EY, Tax Partner, Abhishek Jain said that the confusion is misplaced as there is a reduction of one-third in the value of land when you apply for the rate of 18 per cent. He said that effective GST rate is only 12% which substantially supports the above statement made by CREDAI President, Jaxay Shah.
They also confirmed that the developers or builders apparently deliver the benefits of input tax credit to homebuyers, as per the law. At Present, the home buyers have to pay 15% service tax on the total cost of the apartment or building, which is effectively 4.5 percent.
Parveen Jain, President of NAREDCO who again confirmed 12% as the effective rate has unveiled that they wrote a letter of seeking 6 percent lower GST for under-construction projects instead of 12 percent. And also mentioned in the letter, the higher tax rates will result in price rises which apparently hurt the sales.
They also wanted exemption from GST. Well, affordable housing gained momentum after the interest subsidy and infrastructure status. Based on the expert reports, Real Estate will largely beneficial in the long run. Even buyers too.
Tags: Real Estate, GST, GST effect on real estate, 18% GST on real estate,
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