House purchasing may become cheaper if the new law is implemeted

GST fuel to revive real estate

Kundapur: 2019 might bring good luck to those looking to buy their own house.  The union government has decided to slightly reduce the GST imposed on real estate which is facing a difficult time. If this is becomes true, then may be a couple of thousands will be saved by those holding a house.

The present situation

Currently, several types of taxes need to be paid including customer service tax, stamp duty and VAT. In the coming GST meeting, if the central government slightly loosens its strict rule, then the purchase of flats and houses will become slightly cheaper. Then only stamp duty (by 8%) and builder GST (12%) need be paid.

What became less?

Customers are paying almost 12% GST to buy house that are in construction phase. Besides they also have to pay stamp duty and registration tax. But these two are in the hands of the particular states and hence differs with every state. If this is brought within GST, houses prices may become cheaper.

The calculations

In the business of real estate, other than the tax of 12%, there are taxes like 18% tax on steel, 28% on cement, 28% on granite and marble, 12% on bricks, 5% on sand, stone and gravel and 28% on other things. By adding all this up, to build a building, close to 18 to 28% of tax needs to be paid. If this is brought completely under GST, 5 to 7% tax is enough.

Profit

Since sometime, construction and purchase of building has been facing a difficult time. If all the other taxes are exempted, then the house prices will come down and thus make it possible for the customers to relook at purchasing them. Though it might be a little ore for the builders, there should not be much confusion says Kundapur based builder Ganesh Shetty.

How cheap? How much cheap?

This is an estimated calculation. Now to purchase a flat or a house in Udupi or Mangaluru city costing Rs 50 lakh, the tax to be paid is almost 12% which becomes Rs 6 lakh. If the same is exempted by the union government and brought to 5% then the payment of only Rs 2 – 3 lakh is enough. In the same way for the purchase of a house costing Rs 2 lakh the tax would be s 24,000 but may come down to R 10,000.

Price to fall with implementation of new rule

“By brining real estate within GST, there will be only one tax instead of many taxes. Discussions are being held in this connection and may get implemented in the coming days. This will held the real estate business,” said Shambhu Bhat, assistant commissioner, commercial tax department, Mangaluru

Let input tax credit be availed

“If GST is implemented on real estate, the customers will not get the benefit of input tax credit. If they could avail this, it would be convenient. If 12% GST is implemented, then the customers will get the benefit of input tax credit. If the same is brought down to 5%, then the customers will not get the benefit. Therefore 8% GST will be convenient,” said D B Mehta, CREDAI

Convenient for buyers

“By bringing real estate completely under GST, it will be very useful for anyone purchasing a house or an apartment. Earlier there was 4% tax on VAT and service tax respectively. But this amount will become less,” said Jerry Vincent Dais, district president, CREDAI, Udupi