The Goods and Services Tax (GST) – India’s biggest tax reform post-independence – was implemented on 1 July 2017. This new tax regime seeks to transform the Indian economy with its ‘One Nation, One Market, One Tax’ principle by subsuming a host of indirect taxes charged at varied rates by the Centre and states, therefore bringing uniformity in taxation across the country.
Though its primary objective was to simplify the complex tax structure on the supply of goods and services, the reform created quite a stir due to its complex nature, due to which many myths about GST started making the rounds.
Let us debunk some of these myths.
MYTH: GST has equal impact on all residential properties
FACT: The impact of GST on property is mainly dependent on segmental classification of projects. The extent of the impact on residential properties predominantly depends on the phase of construction, the location as well as the type of project. For example, impact will be observed more in case of new launches as compared to near completion projects. Similarly, suburban projects will be more impacted as compared to city-centre projects and affordable or value housing will see larger impact as compared to luxury housing. This is on account of different proportion of land cost in project cost (land cost exempted from GST), different GST applicable to different materials, amount spent split in pre-GST time and post-GST time and on account of lower GST for affordable housing projects.
Thus there is no uniform or single amount by which residential properties are impacted due to GST system.
MYTH: Everything is clear about GST in real estate
FACT: There still persist certain grey areas which are yet to be evaluated by tax experts to stand the ‘test of law’. Some of them are: