How Does G.S.T. Affect Home Buyers?

Industry Insights

The Goods and Services Act or the G.S.T. is believed to be one of the most revolutionary steps towards the rationalisation of indirect taxes in the country.

G.S.T. has also manifested itself in the real estate sector in many ways. If you are a prospective home buyer, it is important for you to understand how the Act affects you.

G.S.T has a dual effect on prospective home buyers. One on end, it has removed the burden of paying various taxes at different levels. Additionally, it has also resulted in a service tax of 12% for under-construction homes.

So far, when buying an under-construction home, the buyer had to pay both, service tax (4.5%) and V.A.T., which varied from state to state. The additional indirect taxes paid by the builder were added to the cost of the home – which led to an increase in cost.

On the other hand, industries are debating about as to what extent will G.S.T. impact the cost of raw materials used in the construction industry.Depending on the change in the cost of these raw materials, there could be a further update on the cost of construction and subsequently, real estate properties.

“We see the introduction of G.S.T. as a positive move by the government for the enhancement of the real estate sector. Initially, the markets will experience some short-term confusion, in terms of input tax credit, but in the long-term, this reform will be beneficial to the sector. It is a moment of pride to see India take a step in this direction. From an industry perspective, Peninsula Land regards this as a good move as it brings transparency within the system and levels out all unorganised players. This, in turn, will boost the confidence of potential homebuyers, giving them the benefits of one tax as opposed to multiple taxes,” says Nandan Piramal, Director-Sales & Marketing, Peninsula Land.

While the question playing on buyers’ minds is whether homes will become costlier or cheaper in the long run, that’s an answer only time and market trends can reveal.

It should be noted that G.S.T. will not subsume the stamp duty due to be to paid for registration of the property. Of course, G.S.T. will reduce the hassle of paying different duties and taxes at various regulatory offices.