The overall existing tax liabilities of home buyers will not be majorly unaffected after the introduction of the GST regime. The GST Council has brought the real estate sector under its range partly via works contracts. This will be taxed at 12% under the GST regime. Home buyers in our time have to pay several indirect taxes such as service tax, value added tax and excise duty tax. The total of these taxes is about 11% excluding the stamp duty.
Due to the new GST tax, every other indirect tax will be subsumed. A homebuyer will have to pay 12% uniform tax on the purchase of the property except stamp duty. This tax issue is suitable for under contraction properties only. Ready to move in apartments and completed properties do not come in this circle. Developers have to pay the central sales tax and excise duty on the overall construction materials.
Imposition of the GST
The government has advised developers to pass on every benefit that they may avail under this tax regime to every home buyer. Builders expect a lot to pass on the lower tax burden benefits under the new GST regime to buyers of property by reduced installments or prices. Construction companies and builders must not ask their customers to pay any high tax rate on installment to be received subsequent to the imposition of the GST.
The five percent of gross domestic product of India is about the real estate sector. The real estate is the second largest employer of the nation at this time as per an E&Y report from 2015. The real estate sector faces different issues due to macroeconomic conditions and financial policy decisions. The overall management of different indirect tax levies is one of the challenges of this real estate sector in recent times.