Impact of GST on the Real Estate Sector of India

Wave One 

 With the Indian Government launching GST or The Goods and Services Tax; it is all set to have a great impact on the real estate market. The real estate sector is expected to account for about five per cent of India’s GDP and is regarded as the second-largest employer in the country. As far as the impact on residential real estate is concerned; GST may not help in bringing down the prices drastically but it will certainly benefit the stakeholders.

The impact of GST on residential properties:
  • All under construction properties are charged at 12% on property value and this does not include registration charges and stamp duty.
  • This will not be applicable for the ready to move in apartments of completed projects
  • Under GST, the property developer is bound by VAT, entry taxes and central excise duty on construction material cost
  • Reduced transportation and logistics costs under GST will decrease the overall cost

Now coming to the impact of GST on commercial properties

If you are renting or leasing commercial properties in Noida or in other parts of the country and you are earning more than INR 20 lakh annually; then remember that GST will be levied on rental income that is more than 20 lakh. However, for house properties that have been given on rent for office or shop purpose, GST will not be levied up to INR 20 Lakh. So, if you are receiving more than INR 20 Lakh by giving your commercial property on rent or lease per annum; then you will have to register yourself with the GST network to pay taxes.

Experts say that GST will certainly be a game changer for the Indian real estate sector since it will consider over 16 major taxes and bring them into a single combined tax. In addition, the combined tax rule will stop the unsolicited practice of double taxation, which upsets real estate sectors. Even though unorganized real estate entities are cagey about the impact of GST, it will help the organized entities. As GST is imposing transparent transactions across all sectors, this can be regarded as a blessing in disguise for the real estate sector.