The developers’ body CREDAI has requested the government to implement ITC or input tax credit to the builders. They are saying that this move will undoubtedly bring down the purchase cost for real estate investors or home buyers by 10%.
As per the new GST rule, a 5% tax will be applied to under-construction properties without ITC, which is not an affordable option for housing. On affordable housing, the rate of the GST is 1% without ITC.
In a statement on 10th August 2021, CREDAI said that this move will not only bring down the housing cost by 10% but also boost the supply of affordable real estate projects across all the tier-1 markets.
The association also pointed out that some important construction materials such as cement, which is taxed at 28%, should be brought down to 18%. As the price of steel, cement, and metal is increasing, the GST on all these materials has also increased drastically. These increases in GST are affecting the general public.
Apart from the various taxes, real estate investors need to pay while purchasing 2 BHK flats for sale in Mulund East, the GST or Goods and Services Tax is one of the largest.
Since the introduction of GST in 2017, in a short amount of time, many changes have been applied to the GST tax regime. Even though it’s been more than four years since the introduction of GST, the real estate industry still believes that the current GST rules should be improved. While the government is still dealing with these issues, people are determining the implications of GST on real estate.
Before the introduction of GST, various central and state taxes were imposed on real estate through the construction course of 2 BHK in Mulund. While these taxes enhanced the project development costs, builders didn’t have any credit against the output liability. Some of the most important taxes that real estate investors need to pay before the introduction of GST are Central Excise, VAT or Value Added Tax, Octroi, Entry Tax, Service Tax, LBT, etc. Initially, builders have faced these taxes and they transferred this to the property buyer.
Additionally, the buyer has only a little clarity over the applied taxes. Hence, the property developers started to manipulate those numbers to increase their advantages.
The GST regime was introduced on 1st July 2017. Considered the biggest tax change in India after independence, the GST banished multiple indirect taxes to help the taxpayer. Even though the GST for the real estate industry was a lot higher, but Narendra Modi reduced the taxes in 2019 by launching a revolutionary tax regimen. This made the 2 BHK Apartments in Mulund East much more affordable to common people.
With the intent to boost the marketing effectiveness of the real estate market, the government has decided to decrease the rate of GST on properties. As per the latest report, now people have to pay GST less than 4%-6%.
While the new taxing rule without ITC will be applied to all new 2 BHK Flats projects, builders could pick a one-time option between the old or revised rates for their ongoing construction projects.
One of the most attractive characteristics of GST law resides in the ITC system. This is what makes the new GRT rule different from the previous one. From the starting of the house project to its completion, real estate developers should pay various taxes while purchasing goods and services.