Real estate prices hike after GST Rollout

The immediate impact of the Goods and Services Tax (GST) on consumers is that they will need to shell out more money for ready-to-move-in flats because developers who have large unsold inventories will need to get them off the block and may try to pass on higher tax burdens to buyers. On the other hand, new flats should cost less. However, under the new regime, effective tax on an under-construction project goes up to 12 percent, that is, increase of 6.5 percent.
Touted as one of the biggest indirect tax reforms after Independence, the GST rollouttries to cut down on a plethora of taxes and their concomitant complexities by an order across industries. However, it will be interesting to see how the simplicity aspect converts into tangible benefits for the eventual consumer and thus India’s famed middle class.

Is simple beautiful? The simplicity factor of GST law

The GST replaces different taxes that the Central and State governments levy separately. Moreover, it allows registered businesses to claim tax credit to the value of GST they paid on purchase of goods or services in other states as part of their normal commercial activity. Merging various Central as well as State taxes into one single tax mitigates cascading or double taxation. Experts are of the view that the simplicity of the tax structure will lead to better and more efficient enforcement and administration. But will that lead to increased coffers or savings for the public?

Expert speak: Opinion varies across the sector

Earlier value-added tax (VAT) and service tax used to be levied at differing rates across states making tax computation incomprehensible for the common man. 
“Due to information asymmetry, consumers were largely unaware of how VAT and service tax are calculated – definitely, the entire tax calculation was too complex for lay people to understand. Any real estate product comprises of three expense components, namely land, material, and labor or service costs. VAT is calculated on material cost, and service tax is calculated on labor and service cost. It is very difficult for buyers to ascertain what components were included for calculation of VAT and service tax,” says Anuj Puri, Chairman, Annarock.
He adds: “the implementation of GST makes the calculation much simpler since the buyer has to pay only a single Goods and Services Tax. VAT and Service Tax together accounted for 7-9% of the ticket price for a residential property, which is 3-4% lower than the GST rate.” 
“At this point we cannot predict. Construction cost is not likely to come down,” says Shantilal Kataria, President, CREDAI. Prices of flats will depend on different factors such as stage of construction, sale, and amount received, he adds. 
First published on @Techstory

Comments

Post a Comment

Popular posts from this blog

IT sector job cuts will continue, says top HR firm; 5­–6 lakh engineers to lose jobs

Image
By Muqbil Ahmar Tech Mahindra,  Infosys, Wipro, Cognizant ; all these Information Technology majors have fired thousands of employees.  India's Information Sector  seems headed for an uncertain and tumultuous future. According to a top  HR firm , the dark clouds hovering over the IT sector are here to stay. HR firm Head Hunters India has said that 5–6 lakh engineers are set to lose jobs in the next three years, that is, between 1.75 and 2 lakh per year for the next three years. "Contrary to media reports of 56,000 IT professionals to lose jobs this year, the actual job cuts will be between 1.75 lakh and 2 lakh per year in next three years, due to under- preparedness in adapting to newer technologies," Head Hunters India Founder-Chairman and MD K Lakshmikanth has said, while analyzing a report submitted by McKinsey & Company at the Nasscom India Leadership Forum on February 17. The  McKinsey report  has said that nearly half of the Information Technology se
Read more

GST will make highways free of traffic

Image
By Muqbil Ahmar The current scenario of the  logistics industry  in  India  is far from ideal. Today, Central and state governments levy different taxes separately. A  Ministry of Road Transport and Highways  report says that a typical truck spends 16% time at check-posts. On an average, a truck in India runs an annual distance of 85,000 km compared to 150,000 to 200,000 km in the Western countries. The industry is fragmented due to the state-level tax structures, which forces enterprises to put up warehouses in every state. This makes the  supply chain  longer than necessary and to a certain extent inefficient. Additionally, due to the complex tax structure, the transport industry spends 50--60 percent of resources on  tax compliance  and deposit of interstate sales tax. GST implementation aims to remove complex web of tax structure The  Goods and Services Tax  ( GST ) will be implemented this year. The new law is expected to help the overall growth of  economy  and a so
Read more

How is India suffering from chronic poverty? Tackling India’s hunger problem and ways to fight it through technology

Image
A huge chunk of the Indian population suffers from chronic hunger. On the  Global Hunger Index , India is at the 97th position. According to a study by the  International Food Policy Research Institute  ( IRPRI ), one-sixth of India’s population is undernourished, while 190 million people go to bed hungry daily. A total of 30% children below the age of 5 years are underweight. India alone accounts for around 30% of neo-natal deaths internationally, all linked to  malnutrition . Rs. 50,000 crore worth food wasted yearly  behind India’s hunger One may be tempted to conclude that the culprit is insufficient food production. However, this is not true. In India’s case, around 40 percent of fruits and vegetables and about 20 percent of grains get destroyed because of insufficient infrastructure and supply chains that are inefficient. Food never reaches consumers. Around Rs. 50,000 crore worth of food is wasted every year. Such wastage has other ramifications as well. It results not
Read more