Real estate contributes to almost 8% of our nation's total GDP. Before the onset of GST, buying an under-construction property meant you were subject to VAT, service tax, stamp duty, and registration charges. However, purchasing a completed property meant only the application of stamp duty and registration charges.
The application of GST will reduce the amount of buying a house, especially if booked before construction. Now developers too shall enjoy input credits on GST paid on goods and services delivered by them as that liability shall be passed on to potential buyers.
Taxes levied over real estate have also become simpler as the government has removed stamp duty after the application of GST, thereby making the impact of GST on the real estate sector more prominent. All under-construction properties will total to 5% of GST without the input tax credit. There is no GST applicable for ready-to-move-in properties. If you are looking to purchase a house, consider these effects of GST on properties.
Suppose the carpet area of a particular property is up to 60 sq. meters, and in a non-metro, it is up to 90 sq. meters. In that case, that property can be included in the affordable housing scheme. This affordable house will accrue 1% GST if its value is below 45%; otherwise, 5% GST is applicable. These are some of the important effects of GST on the real estate sector.
Builders have to pay a higher tax amount in the 4-tier taxation, but they also avail input credits later. However, the burden for potential buyers has risen, as they will have to bear GST apart from those who are a part of the CLSS Scheme. Thus, one can easily notice how GST benefits the Indian economy.