Gst for real estate sector
This query is : Resolved
21 May 2017
Dear Sir,
Currently for apartments booked by a person, there is net of 6% Service tax (along with VAT charges by respective state govenments). THis is due to the 60%/65% abatement provided for input of raw materials etc going into the construction cost - which has already suffered tax.
With GST regime, it is understood that real estate will face 12% GST as replacement of service tax and VAT
However, the article below highlight tow concerns.
https://www.moneycontrol.com/news/business/economy/gst-rates-under-construction-properties-to-attract-12-tax-2284599.html
a) The value of land is included in the amount charged from the service recipient.” These will be taxed at 12 percent with full input tax credit.
What does above mean? does it mean the buyer is taxed twice once for stamp duty/regn expenses on land cost & again 12% service tax?
b) The second point is on abatement as below:-
Earlier, both developers and homebuyers received benefits under the abatement scheme (reduced tax rate under a special scheme). Under the current service tax regime, for those buying an under-construction flat, an abatement of 75 percent was allowed, subject to the flat being less than 2,000 sq ft and sold for less than Rs 1 crore, taking the effective tax rate from 15 percent to 4 percent. Similarly, if the cost of the flat was above Rs 1 crore and the size of the unit was more than 2,000 sq ft, the abatement was reduced to 70 percent and the effective tax rate to be borne by the buyer was 5 percent. States also charged VAT over and above service tax. This has now been done away with, say experts.
So, if there is no abatement, will there be 12% GST on the total cost of flat, which will spike the cost exorbitantly.
Though it is still a beginning of discussion, the news causes worry to the flat buyers like me.
Kindly provide clarification / explanation on real situation
THanks and Regards
Rajasekar
Currently for apartments booked by a person, there is net of 6% Service tax (along with VAT charges by respective state govenments). THis is due to the 60%/65% abatement provided for input of raw materials etc going into the construction cost - which has already suffered tax.
With GST regime, it is understood that real estate will face 12% GST as replacement of service tax and VAT
However, the article below highlight tow concerns.
https://www.moneycontrol.com/news/business/economy/gst-rates-under-construction-properties-to-attract-12-tax-2284599.html
a) The value of land is included in the amount charged from the service recipient.” These will be taxed at 12 percent with full input tax credit.
What does above mean? does it mean the buyer is taxed twice once for stamp duty/regn expenses on land cost & again 12% service tax?
b) The second point is on abatement as below:-
Earlier, both developers and homebuyers received benefits under the abatement scheme (reduced tax rate under a special scheme). Under the current service tax regime, for those buying an under-construction flat, an abatement of 75 percent was allowed, subject to the flat being less than 2,000 sq ft and sold for less than Rs 1 crore, taking the effective tax rate from 15 percent to 4 percent. Similarly, if the cost of the flat was above Rs 1 crore and the size of the unit was more than 2,000 sq ft, the abatement was reduced to 70 percent and the effective tax rate to be borne by the buyer was 5 percent. States also charged VAT over and above service tax. This has now been done away with, say experts.
So, if there is no abatement, will there be 12% GST on the total cost of flat, which will spike the cost exorbitantly.
Though it is still a beginning of discussion, the news causes worry to the flat buyers like me.
Kindly provide clarification / explanation on real situation
THanks and Regards
Rajasekar
21 May 2017
a) Land cost will be excluded from service tax based on land value considered for stamp duty.
b) The cost will not spike when input credit on input tax is considered. GST paid on steel cement and all other building materials and services utilized will be claimed while paying the 12% GST on flat. After such credit taken the effective rate will be at 5% what has been paid earlier.
b) The cost will not spike when input credit on input tax is considered. GST paid on steel cement and all other building materials and services utilized will be claimed while paying the 12% GST on flat. After such credit taken the effective rate will be at 5% what has been paid earlier.
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28 May 2017
Sir,
I refer to below article in ca club where it is stated that cost of land will be included. Can anyone clarify on this (about tax input credit for the stamp duty/regn fee)
19. Construction of a complex, building, civil structure or a part thereof, intended for sale to a buyer, wholly or partly. [The value of land is included in the amount charged from the service recipient] 12% With Full ITC but no refund of overflow of ITC
Read more at: https://www.caclubindia.com/news/gst-rate-chart-on-services-and-exempted-items--16100.asp
I refer to below article in ca club where it is stated that cost of land will be included. Can anyone clarify on this (about tax input credit for the stamp duty/regn fee)
19. Construction of a complex, building, civil structure or a part thereof, intended for sale to a buyer, wholly or partly. [The value of land is included in the amount charged from the service recipient] 12% With Full ITC but no refund of overflow of ITC
Read more at: https://www.caclubindia.com/news/gst-rate-chart-on-services-and-exempted-items--16100.asp
28 May 2017
Stamp duty and registration fees is out side the purview of GST hence no input credit can be availed on it.
28 May 2017
Thanks Sir,
So, it looks like the GST is going to have increased load on the buyer. My builder has already sent mail that GST at 18% (not 12%) will be charged on entire flat cost, meaning a more than a three fold increase on current service tax. Not sure if it will be good to cancel booking
So, it looks like the GST is going to have increased load on the buyer. My builder has already sent mail that GST at 18% (not 12%) will be charged on entire flat cost, meaning a more than a three fold increase on current service tax. Not sure if it will be good to cancel booking
28 May 2017
No need to worry tax effect will be neutral after claiming input credit on material and services. Earlier no input credit allowed on material. The builder has to pass it on input credit to you.
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