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Advantages And Disadvantages Of Residential GST In India

By Rishabh Chamoli | 2023-03-22

GST And Real Estate
GST is one of the levies that buyers must pay when purchasing real estate. The GST rate on real estate was implemented on July 1, 2017, and much has changed since then.
Previously, when purchasing an under construction property, the buyer was required to pay service tax, VAT, stamp duty, and registration fees. Property acquisitions were also free of service tax and VAT after completion. A buyer merely had to pay stamp duty and registration fees for a full property.

The real estate business contributes around 7.8% of Indias GDP. The real estate business is the second largest employer (after the information technology industry). The industrys issues will be mitigated by the implementation of this revised real estate tax.
That will aid the industrys recovery from the upheaval it has been through for quite some time. This article will look at the numerous features and effects of GST on real estate.

GST And Its Impact On The Real Estate Industry
Before, a contractor or developer was required to pay different charges such as VAT, Excise duty, Customs duty, and Entry taxes on inputs/raw materials. They must also pay Service taxes on a variety of input services such as professional architect costs, approval charges, labour charges, legal expenses, and so on. Because ITC was not applicable to Customs duty, CST, Entrance Tax, and other taxes, it was likely to be a burden on the buyer by influencing pricing.

Numerous other services related to the real estate business are also affected by changes in the Goods and Services Tax.

For example, cement previously had a tax rate of 27 to 31%, which has now been reduced to 18% under the updated tax scheme. As a result of the GST impact on real estate, an increase in cement prices would raise the entire building cost.

Advantages Of GST In India
GST combines a multitude of indirect taxes into a single tax, simplifying taxation for the service and commodities industries.
Analysts believe that the adoption of GST will lower the long-term expenses of goods and services. This is due to the elimination of the cascading impact of a number of VATs and levies.
Service providers with a turnover of less than Rs.20 lakh are exempt from GST. The barrier in the North Eastern states is Rs.10 lakh. This will reduce the number of time-consuming tax procedures.
Under the GST taxation procedure, companies with a turnover of up to Rs.75 lakh can benefit from composition programmes and pay only 1% tax on their turnover. This will simplify their taxation procedure.
The GST is intended to reduce corruption and sales without receipts.

Disadvantages Of GST In India
Increasing expenses of purchasing software to aid in the GST filing procedure result in increased operational costs for many firms.
GST has increased the complexity for many company owners across the country. SMEs with a total income of Rs.75 lakh might benefit from the composition plan, paying only 1% tax on turnover and complying with fewer regulations; however, they cannot claim the input tax credit.
GST also now charges items such as braille paper, wheelchairs, hearing aids, and so on.
Due to the complexity of product taxes, manufacturers have suspended their reward schemes, which will undoubtedly hurt customers.
GST transaction costs in the banking industry have increased from 15% to 18%.
Insurance premiums have increased as a result of GST. The impact of GST on the real estate market prompted an 8% increase in real estate prices. This resulted in a 12% drop in demand shortly after it took effect in June 2017. This, though, might be a fad.
Petrol is not subject to GST, which contradicts the goals of commodity unification.