Impact of GST on the commercial real estate in Pune

The introduction of the recent Goods and Service Tax or GST as commonly known took the entire country by storm. With its mention, individuals over the country pooled in to discuss its effects and awaited the revised tax structures eagerly.

While many did not have any idea of how it would impact commercial real estate, businesses and entrepreneurs were curious and kept their fingers crossed and prayed that it wouldn’t pose as a challenge to their everyday lives. 

Once finally in place, some rejoiced while others did not. However, consumers all over the country were mostly happy since it played a fair role in stabilizing the overall tax structure and avoided confusion that was previously there due to multiple taxes.

To help understand the real impacts that GST has had on the commercial real estate for sale, here are some to ponder upon:


Impact of GST on the commercial real estate in Pune

Image Source


1. Increase in Real Estate Tax

As per the new laws, GST will now add a tax slab of 18% on real estate that is divided into 9% SGST (State Goods and Service Tax) and 9% CGST (Central Goods and Service Tax).

This tax structure will overcome all other types of tax that used to be included and will now be purely GST with no other inclusions. Another aspect is that the government has now allowed deduction of land value equivalent to 1/3rd of the total amount charged by any developer. 

2. Better Accountability and Transparency

With the new GST law in place, previous acts of scamming buyers by burdening them under various types of tax structures won’t happen anymore.

As a buyer, one should know about the reach of GST and its basic effects on real estate. All of this will ensure that accounts and transparency in dealings of commercial real estate investing are maintained.


Impact of GST on the commercial real estate in Pune


Image Source


3. Elimination of Previous Taxes

With GST, different types of tax heads in the commercial real estate like excise duty, entry tax, CST, customs and octroi paid by the developer will all be covered under one single head.

In the long run, with the correct implementation of the system, it is also expected that a unified GST will help bring down the cost of construction and hopefully increase the margin in the hands of the contractors.


4. Detailed Returns Will Now Be a Thing of the Past

KPMG Partner (Indirect Tax) Priyajit Ghosh says “The government has said that a detailed return need not be filed by traders/businessmen only a summary return would suffice.”

Thus, the new law has made the government take a slightly more lenient view and reduce the challenges on the compliance front.

Impact of GST on the commercial real estate in Pune


Image Source


5. An Initial Transition May Prove Difficult

Although the initial days are now over, this period did see some challenges and issues on both fronts – buyers and sellers. Due to the new act, paperwork had to be redone and filed, and buyers were confused with the new laws too.

6. A Huge Threat to Unregistered Vendors

With the introduction of GST, the responsibility of tax payment has now been shifted from the provider to the receiver. In such a case, dealing with an unregistered vendor will attract a reverse charge, causing buyers to strictly stay away from them.

This will slow down business and over a time may even diminish, thus causing a threat to those vendors who are unregistered.

Thus, post GST introduction, commercial real estate has also seen a change. However, with the Regulation and Development Act, 2016 or popularly known as RERA act now in place, both GST and RERA will hopefully help the industry become more transparent and make buyers more confident.

 

Popular Post