GST Rates for Home Buying in Detail
Post by : favouritehomes
The introduction of GST created its own share of confusion in the real estate sector, leaving homebuyers sitting on the fence, undecided. However, the wait is over now and as the sands of doubt are settling down now, investors are ready to go into the buying mode again.
The interim period, however, left builders with old inventory which they are keen to sell off so they can start reinvesting in newer projects. This is also why they are now offering attractive discounts and freebies to homebuyers to come to invest in ready-to-move-in homes.
Homes that had already received the Occupancy Certificate prior to the implementation of the GST aren’t within the ambit of the GST and buyers only have to pay the registration and stamp duty charges aside from the sale value on ready-to-move-in homes. This has led to an increase in preference for ready-to-move-in homes. Earlier about 70-80% of the homes were sold between the launch and completion stage.
Under-construction properties, on the other hand, attract an effective GST rate of 12% currently. In the pre-GST era, properties attracted taxes which included VAT, service tax, Krishi Kalyan cess, Swacch Bharat cess, etc, which all worked out to about 9% of the total sale price (cost of land and construction).
However, for the low-cost affordable housing sector, there is a request made to lower this 12% to around 6% for greater benefits to the masses.
Realty developers are of the opinion that if GST rates are dropped further, it will attract more home buyers to invest in under-construction properties, making more finances available to the builders aside from increasing government tax revenue earnings. The GST was implemented to eliminate the earlier cascading multiple tax system, thereby reducing the tax burden on the consumer. The government has put in a provision that the homebuyer should only be charged the GST that the last supply chain charged, and to make sure this rule is implemented, they further added the anti-profiteering clause which prevents builders from charging more.
In case of any malpractices, homebuyers have the right to report the builder to RERA for redressal. This is because builders are obliged to pass on the benefits of tax credits to the homebuyers. With no hidden taxes, builders are also benefitting from projects launched post-GST implementation; they are cheaper than those launched pre-GST. This is because builders will pay lower taxes on construction materials, thus bringing down costs and benefitting both developers as well as homebuyers.
The time for investing is now are you ready?