Saturday, July 27, 2019

GST Positive Impact Towards Real Estate Sector

Real estate industry is one of the most important pillars of the Indian economy. Real estate industry contributes between 6-8% to India’s Gross Domestic Product (GDP) and it stands second after IT industry in terms of employment generation.
With multiple taxes applicable previously like Service tax and VAT, with GST coming into the picture, indirect taxation in this sector is wholly revamped.
Let us understand the implications of taxation of the various real estate transactions under GST.
  1. The pre-GST taxability of Real Estate Transactions
  2. Taxability of Real Estate Transactions under GST
  3. Impact on Buyers
  4. Impact on Developers / Builders / Contractors
  5. Impact on other Stakeholders
  6. Reverse Charge Mechanism (RCM) & its Impact
  7. Treatment of Input Tax Credit, Eligibility and Ineligibility
  8. Conditions for Claiming ITC
  9. Restriction on ITC
  10. Applicability of Stamp Duty

1. The pre-GST taxability of Real Estate Transactions


Nature of DutyRate of TaxWhen was tax required to be paid?
or What triggered tax?
VAT*1 to 4%On Sale of Under Construction Properties
Service Tax4.5%
Registration Charges0.5 to 1%
Stamp Duty Charges*5 to 7%

* VAT, Registration Charges, Stamp Duty Charges vary from state to state
VAT was not applicable on completed or ready to sale properties
Under the erstwhile indirect tax regime, Cenvat Credit on inputs used for the construction of a building or a civil structure or any part thereof was restricted too.

2. Taxability of Real Estate Transactions under GST

ParticularsApplicabilityRate of TaxInput Tax Credit
On ready-to-move (RTM) properties for which completion certificates are issuedNot applicable – Because Sale of building is treated as activity or transaction which shall be treated neither as a supply of good nor a supply of service as per SCHEDULE III of CGST Act,2017Not available
On Under Construction Properties (For Homes Purchased Under Credit-Linked Subsidy Scheme)Applicable as supply of services as per Schedule I of CGST Act, 20178%*Available
On Under Construction Properties (Other than above)Applicable as supply of services as per Schedule I of CGST Act, 201712%Available
On resale propertiesNot applicableNot available
On Land purchase and saleNot applicable. As per Schedule III, sale of land is neither supply of goods nor services.Not available
Works contractApplicable18%Available
Composite supply of works
contract
Applicable18%Available
Composite supply of works
Contract to Government Authorities
Applicable12%Available
Composite supply of works contract – for use by general publicApplicable12%Available
Composite supply of works contract – Affordable HousingApplicable12%Available
* NOTE: The homes purchased under the Credit-Linked Subsidy Scheme (CLSS) attracts 12% GST rate. The applicable rate will be 8% after cutting the 1/3rd amount towards the cost of land.

3. Impact on Buyers

Under the earlier tax regime, buyers had to pay VAT, Service tax, Registration charges & Stamp duty on purchase of properties under construction. Also since VAT, Registration charges & Stamp duty were state levies, prices of properties varied from state to state. Moreover, developers had to pay various duties like sales tax (CST), custom duty, OCTROI etc. for which credit was not available.
Under GST, a single tax rate of 12% is applicable on properties under construction while GST is not applicable on completed or ready to sale properties which was the case in previous law. Hence buyers will benefit from reduction of prices under GST.
In the short-term, buyers may stick to “wait and watch” approach to gain more understanding on the impact of GST on property prices and defer buying decision.
Also, in the long term, GST will a positive impact on buyers if the benefit of input tax credit received by the developer is passed on to the buyer.

4. Impact on Developers / Builders / Contractors

Under the previous tax regime, developers had to bear Excise duty, VAT, Customs duty, Entry taxes etc. on raw materials / inputs and Service tax on various input services like approval charges, architect professional fees, labor charges, legal charges etc. ITC was not available for duties like CST, Customs duty, Entry Tax etc. This would impact the pricing and subsequently the burden was transferred to the buyer.
Under GST, developers’ construction costs are significantly reduced as multiple taxes are subsumed and due to the availability of input tax credit. Also, reduction in cost of logistics will be an added benefit. Hence developers may see improvement in margins.
On the downside, developers have to do multiple calculations to arrive at ITC in order to pass it on to the buyers. Hence, in most cases, they can pass on the ITC only during the final stages.
This lack of transparency on ITC, may affect the developers since buyers may resort to “wait and watch” approach and defer buying decision.
And, in the erstwhile laws, a large portion of expenditure remained unrecorded in the books. Under GST, availability of credit on inputs and cloud storage of invoicing has reduced under recording of expenditure.

5. Impact on other Stakeholders

The impact on the allied services like labor, material suppliers, service suppliers etc. depends on the increase or decrease in the tax levied on these goods and services. This will have a consequential impact on real estate industry as a whole.
For example, earlier cement was taxed at an effective rate of 27-31 percent which will now be taxed at 18 percent. Increase in cement prices will result in consequential increase in the overall cost of construction.
GST Rates for some of the goods relating to the construction industry are given below:
ProductRate of GST
Sand5%
Sand & Fly ash Bricks12%
Steel18%
Paints18%
Marble and granite28%
Cement18%

6. Reverse Charge Mechanism (RCM) & its Impact

The concept of RCM has been borrowed from the erstwhile Service tax law. The scope of RCM has significantly expanded in GST which may adversely impact the developers.
  • One of the significant additions to RCM under the GST law is, if goods are procured / service are received from a person who is not registered under GST,  a registered person under the GST has to pay GST on all such supplies.
  • In cases where services are received from goods transporters, legal services received from an individual or firm, services received from the government or local authorities, like municipalities, etc. (subject to exceptions), developer has to pay the GST on the same.
  • Also, under GST, the developer cannot adjust the tax payable under RCM against the input credit available from the GST paid on the inputs. Instead, it has to be paid by cash/bank payment.
This will increase the costs and has a negative impact on the developers, especially the small developers.

7. Treatment of Input Tax Credit, Eligibility and Ineligibility

Under GST, credit of taxes charged on all input and /or input services which are used or intended to be used in the course of furtherance of business would be available subject to exceptions.

Conditions for Claiming ITC

A registered person will be entitled to claim input tax credit only upon fulfillment of the following conditions:
  • He has the possession of tax invoice (purchase invoice) / debit note.
  • He has received the goods and /or services or both;
  • The tax charged on such supply is paid to the Government by the supplier.
  • He has furnished a valid return.
  • The goods and services should not have been used for personal use.

Restriction on ITC

Input tax credit is not available on supplies received for construction of an immovable property on his own account other than plant and machinery
NOTE: The word “construction” includes reconstruction, renovation, additions or alterations or repairs to the extent of capitalization to the said immovable property.
Example 1: If the cost incurred for the change of interiors of service apartment is added to the cost of immovable property (in this case, service apartment) then it forms part of the cost of Service apartment (immovable property) and accordingly  input tax credit is not available for the taxes paid on change of interiors of service apartment.
Example 2: Mantri Developers constructs a building for its branch office. In this case, ITC is not available.
Example 3: L&T constructs a hydraulic machine used for construction of its branch office. In this case, ITC is available.

10. Applicability of Stamp Duty

For the limited purpose of calculating the GST, stamp duty and registration charges are excluded.
Stamp duty will continue to be applicable on both completed properties and under-construction properties as was the case with pre-GST regime.

Friday, July 5, 2019

Buy 2 BHK At Price Of 1 BHK Flats IN Badlapur East

Sales and Offers in Monsoon 

Monsoon is one of the favorite seasons as most of the offers come in these months. The offers which you cannot ignore and yet it makes you come out of your home to see them. The real estate offers the same buying home is a dream come true for many people. Few people achieve their goals but few people get stuck in decision making. There are many factors which make you take the final decision about your buying dream home. The factors could be financial, personal, location, transportation, amenities etc The list is endless. While searching for the home you need to create a list that will help you or guide you till your final decision.

Prepare List while Buying Home


The list would carry a few points such as why, where, when, who, what all WH questions you need to prepare. If you get the positive answer to all your WH Questions then consider the property buying decision, your Dream Home. It’s been often seen that you like the property but get rejected by some other factor.

Real Estate Offers: Buy 2 BHK AT PRICE OF 1 BHK FLATS IN BADLAPUR EAST

Buy 2 BHK at Price of 1 BHK Real Estate Monsoon Offers 
The offer which we going to explain in my post is “BUY 2 BHK at Price Of 1 BHK Flats” Yes it is true the price which the project offers during monsoon is for the limited period offers where you can get the best deals for your dream home. The offers end on 31st July 2019. Kindly visit Ushakiran Residency to know the floor plan and all amenities offers by the UshaKiran residency group. The project is 7 minutes away from the Badlapur railway station. Share Autorickshaw charges 10 rupees. Supermarket, central hospital, School is in 1 km range from the project.



 Book your Site Visit: to know more about the offers and available flats and undergoing project please call us : 7666744411