The GST levied by the Indian government has rendered a differentiated impact throughout the entire range of business sectors and industries in India. Whilst some industries have emerged beneficial from the implementation of GST, certain minor and major industries have received the short end of the stick. With an appropriately differentiated impact throughout the market, GST has even showered certain industries with both blessings and curses. With the tag, “One Nation, One Market, One Tax,” GST core target behind this varied impact was to establish an equity in the market.
Among the industries that have underwent a major renovation post GST imposition is the real estate industry. Housing ( or shelter ) is one of the basic needs of human beings, hence, without much doubt, real estate happens to hold one of the biggest market in the country. An industry with numerous players of varying business strength and intermediaries functioning at different stages of the business ( at times illegitimate intermediaries.) Now, considering how GST aims to draw an equity among all the players and establish a window of accountability and transparency between the business sectors and the government, the real estate industry has been forced to restructure their business from top to bottom. However, the new changes in real estate have shaped the industry for better ends as compared to earlier.
GST with a comprehensive approach augments the real estate industry both in terms of price-efficiency and construction-efficiency. The traces of which have crossed the direct industry forums and penetrated into various media platforms, such as the likes of blog article about property investment at smartowner and other websites.
In the pre-GST market, goods and services were imposed with a multi-layered taxation system, that included taxes such as, service tax, luxury tax, central excise duty tax, additional excise duty tax, entry tax and such. The real estate industry with its multiple stages of production including, buying of raw materials and intermediary goods, hiring contractors and subcontractors, transportation of goods, fell prey to a majority of the applicable taxes.
Whilst the ongoing of the production process, at every stage of the process the industry incurred a system of taxation, which in the later stages remained unaccounted for. Eventually, the final product price reeked of a compounded effect of taxes on taxes. The government after revolutionizing the market with the whip of “One tax – GST,” will round up such taxation loose ends in real estate.
The implementation of GST will trigger a promotion of national market in the supply ends of real estate. Under previous circumstances, transportation of raw materials from across the state borders were subjected to tax. Eradicating this phase of taxation and including its offset into the GST, the new regime will allow the developers to comfortably reach out beyond the borders and opt for the best suppliers at a minimum price. Eventually incorporating both quality enhancement and price-efficiency in the production process.
The exercising of GST in the real estate market is a boon to buyers as well. The earlier real estate buying routine that included service tax and VAT, indeed added up and marked below the current 12% GST, but when looked upon the circumstance from a broader perspective, one would realise that as the price-efficiency in the production process is carry forwarded onto the final pricing, the final price ( instead of facing a higher aggregate tax rate,) will stand at a rate lower to earlier.