GST on real estate: Will it benefit home buyers and the sector?

Finance minister Arun Jaitley, recently pitched for bringing the real estate sector under the ambit of the Goods and Services Tax (GST). We examine the advantages that this would bring and the possible hurdles in implementing such a move.

Beyond the political overtones, the economics of the existing taxation structures, do not indicate a smooth transition, if the real estate sector were to be brought under the Goods and Services Tax (GST). There are many issues and grey zones that need to be ironed out, before GST becomes a reality in real estate.

  • Land is a state subject and stamp duty and registration of properties, are a major source of revenue for states.
  • Combining the present rate of 12 per cent GST plus 5-7 per cent stamp duty, would make housing beyond the reach of many in India.
  • Offering a slab of five per cent and 12 per cent for low-cost and other housing projects, respectively, may sound buyer-friendly, but revenue sharing between the centre and the states would be a bone of contention.
  • It remains unclear, whether the inclusion of real estate in GST, would check tax evasion in the property market.

The finance minister Arun Jaitley, nevertheless, has announced that the issue of bringing real estate under the GST’s ambit, will be discussed at the next GST Council’s meeting on November 9, 2017. “The one sector in India, where maximum amount of tax evasion and cash generation takes place and which is still outside the GST, is real estate. Some of the states have been pressing for it. I personally believe that there is a strong case to bring real estate into the GST,” Jaitley said.

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