Experts said that the impact on the overall economy will filter through to the real estate, construction, and warehousing sector. In construction, inputs such as cement and ceramic, tiles, building blocks and bricks, prefab structural components for buildings among others have been placed in the 28 per cent category. Other components such as iron and steel, on the other hand, have been placed in the 18 per cent bracket.
“Work contracts addressing construction intended for sale were classified as a service and were placed in the 12 per cent category. It is noteworthy that the value of land would be included in the amount charged from the end-user. Pradhanmantri Awas Yojna (PMAY) has been exempted from GST.
Unlike the previous regime, input tax credit has been permitted for the real estate sector,” Anshuman Magazine, Chairman, India and South East Asia, CBRE said.
According to experts, the declared rate of GST at 12 per cent will now become six per cent above the existing taxes and the end consumer of under-construction properties will end up paying extra in most of the states.
“However, the developers will have to reduce the per sq ft rate to pass on the benefit of the ‘input tax credit’ that they will avail under the GST regime. The step should bring back the net outflow amount of the end-consumer to what it was earlier. It means that as far as prices are concerned there would not go up,” Sunil Mishra, Chief Strategy Officer, PropTiger.com, Housing.com and Makaan.com said.
Also the discount of 33.33 per cent on land price would result in buyers paying only service tax of 15 per cent on 30 per cent of the value of the property which would further result in the net service tax rate of real estate was 4.5 per cent.
This, according to experts, would help in bringing down the cost of affordable housing projects further. “There is a possibility that places where land price is higher than the cost of construction that prices might go up, however for the majority of the residential market which includes affordable housing, this is a good thing,” said Samantak Das, Chief Economist & National Director – Research, Knight Frank India.