advertisement
Will buying property and homes become costlier after the implementation of Goods and Services Tax (GST)?
Let's find out.
The GST on under-construction properties is still 18 percent, but this tax will be applicable on two-thirds of the property. This means, the effective tax will be 12 percent. That's because one-third of the cost of any property will be considered as the value of the land.
However, these reductions will come in in affordable or low-priced homes, the price of premium project houses will remain at the same as before.
Before the GST was implemented, the property purchaser had to pay tax like Value Added Tax (VAT), Service Tax, Stamp Duty and Registration Fee.
VAT used to be different in every state and was fixed by the States. Moreover, in case of VAT, it was not clear how much the builder had paid at which level.
Most of the time, the customer has to pay taxes as stated by the builders and has no option but to believe them. Service tax used to collected by the Centre which was slotted at 15 percent.
The buyers will, however, still have to pay the stamp duty and registration fee like before because these don't fall under the GST.
Those buyers whose flats are ready will not get the benefit of the input tax credit.
This will mean that the tax saving benefit that people with under-construction flats will get will not be given on the ready-to-move flat, resulting in a slight difference in the price of a similar flat for a project. But one has to also keep in mind that GST is not applicable on the ready-to-move flat, that is, you do not have to pay any tax.
If any builder does not pass on the benefit of input tax credit to the customers, the buyer can file a complaint. If the complaint is found to be correct, the builder may have to pay a heavy penalty.
You don’t have to worry about GST if you are renting out your house for residential purpose. However, if you’re renting it out for commercial or industrial use, and if the annual income is more than Rs 20 lakh, then a tax of 18 percent has to be paid.
(This story was originally published in Quint Hindi.)
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)