GST: will it make a great affect on Real Estate?

The new tax seeks to transform India with its “One Nation, One Market, One Tax” principle by involving a host of indirect taxes and implementing a simpler tax on goods and services. India is inspired by more than 160 nations, who have already adopted a unified indirect tax structure. In Asia, GST during the 1980's and 1990's created an effective tax system, with the comparatively lower administration and collection costs by the countries such as Indonesia, Thailand, Singapore, and the Philippines who adopted this system. It has enabled countries such as Singapore and Thailand to lower personal income taxes, which has resulted in encouraging more foreign direct investment (FDI) and stimulated the overall economic growth in the country. In this way, Singapore has gained loads of profit by just implementing the GST taxation system.

GST will leave a great impact on everyone in the Real estate sector in many ways, whether you are a buyer, seller, developer, intermediary, financier or an investor. Are you a buyer and keen to know if the prices of residential real estate post-GST will escalate or not? Are you a developer and worried about the designing and raw material costs? Here’s a look at how the new tax will impact you and the real estate sector.

GST is one indirect and a single tax on goods and services.  GST is the tax supply of goods and services, right from the manufacturer to the consumer. Eventually, GST is likely to be favorable for the real estate sector, with the warehousing segment set to be the biggest beneficiary of the reform. It is expected to ensure that doing business in India becomes tax neutral, irrespective of the location. The investment decisions of warehousing operators will no longer be governed by the comparative tax advantages of various states, thereby enabling them to take informed decisions based on supply chain dynamics. As the construction sector and the raw materials move towards a more systematic mode of operation, the sector is likely to witness the inflow of more institutional funding and formal sources of capital.

The GST Council has categorized renting of immovable property (including a commercial, industrial or residential complex for business or commerce, either wholly or partly) as a supply of service. Whereas it has also included construction of a complex building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, as a supply of service.

GST will bring in a transparent and a corruption-free tax administration, removing the current deficiencies of the taxes and leave behind a corruption- free India. It is a positive step for the nation, to enhance its economy's flexibility and achieve higher growth. With the scale of the real estate sector and Florizel Villas in Mysore, it can drive economic growth across major business segments. If the GST is executed well, it can help improve India’s economy and also make the process of imposing indirect taxes more streamlined.