As we all know, GST (Goods and Services Tax) was introduced by Indian government on 1 July 2017. This tax removed all the previous several taxes which we use to pay.it has been evident that GST has affected every industry, in fact almost every person is affected by GST. Here, we will be discussing the impact of this GST on home buyers.
But before that, we will have some gist of what is GST? And who are home buyers?
Goods and Services Tax (GST)
As told earlier, it was introduced in India on 1 July 2017. Transaction done within a single state is charged with CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax). For inter-state transaction IGST (Integrated Goods and Services Tax) is collected. The GST rate on the booking of under-construction property is 12%.
So now that we know about GST, we will quickly know who does home buyers means.
Home buyer is the person who wants to buy a property or a flat or an apartment. The person who is buying a principal property or residence for the first time is called as first-time home buyer.
Taxes that were paid by home buyers before GST
Before GST, home buyers had to pay service tax, VAT, stamp duty etc. The buyer had to pay approximately 15% of service tax; approximately 1% – 5% of VAT and the rate of stamp duty depend on the person. I mean if you are women it was 4% on property, otherwise it was 6%. If the property is on the name of both then it is 5%.
Now that we know about home buyers, let us find out the GST impact on home buyers.
Impact of GST on Home Buyers
Before GST, there were multiple taxes which home buyers had to pay. VAT, Service tax is one of them. Due to GST, all these taxes have been discarded and this has made the tax payment process simpler.
- 18% tax will be levied on the real estate
As per revised order from the government, for a fully constructed property the rate of GST is 18%. It is bifurcated as 9% CGST and 9% SGST. For the property which is under construction the tax rate is 12%.
- Property tax and stamp duty will be eventually included in GST
Registration tax and stamp duty are still not included in GST till now because these are state levies and property tax is a municipal levies. But still, government is taking their best foot forward to eventually subsume these taxes.
- Easy resolution of taxation issues
After GST, some of the tax issues will become easier to use as there will be no overlapping jurisdiction between state and central government. In GST the rules and regulations will be same to everyone.
- Home buyer will be in benefit
As only one tax will be levied it will be easy for the home buyers. They will not get confused like they used to get earlier due to multiple taxes. Transparency is increased.
Pros of GST
GST is primarily conceptualized around a “One Nation, One Tax” idea and will:
- Help in eliminating all the previous taxes
- Easy agreements
- Uniform tax rates and structure is created
- The burden of additional taxes is reduced
More clarity and simplicity is expected once the GST gets implemented and government has cleared its stand on the decline of the cost of the land for calculating service tax under-construction projects. In short, home buyers are not that much affected because of the implementation of GST.