Realty projects post-GST will benefit: Report

Mumbai: Goods and Service Tax (GST) benefits will be the maximum only for projects announced after implementation of the new tax system, according to a report released by property consultant JLL and Price Waterhouse Coopers (PwC) on Tuesday. As per the report, realty projects prior to GST will not enjoy such benefits. The main feature of GST is passing on input tax credit to the end customer, thereby causing reduction in the final price. Input tax i.e. tax paid on raw material, will be deducted from the output product, benefitting both developers and home buyers.

Kunal Wadhwa from PwC said, “A majority of projects are under construction, which means they are from the pre-GST period. Thus, developers have no clarity about the calculation whether they will be benefitted under GST.”

According to the report, “The lack of clarity in such areas has resulted in developers becoming more conservative in their tax positions. This has also led to developers shifting additional tax costs and their related burden to end customers.”

The report further concludes that cost savings will not be beyond 3 per cent under GST however these savings will also be impacted by the cost of land. Currently, there is 12 per cent GST on residential projects excluding  land cost. Initially, as per the old tax system, 10 to 15 per cent of tax was levied. Ramesh Nair, CEO, JLL, said, “GST has been a matter of discussion for both the demand and supply side of the real estate community. While a transparent, uniform taxation system is good, the exact nitty-gritties of ‘how’ to implement need to be addressed swiftly. The need of the hour is to set up discussion forums across locations and engage with tax authorities and developers at different levels.”