'GST to benefit realty sector, reduce tax burden'

Construction costs would be reduced to some extent and this benefit can be passed on to the customers, thereby spurring home buying

Implementation of the Goods and Services tax law will have a positive impact on the real estate sector with expected reduction in its tax burden, according to property developers and consultants.

"The enactment of this law will single-handedly solve many of the challenges faced by the real estate sector and help in pulling the sluggish sector out of its long slumber. Heavy taxes that are being paid currently by the developers will automatically go down by a considerable percentage," realtors' body NAREDCO president Parveen Jain said.

Construction costs would be reduced to some extent and this benefit can be passed on to the customers, thereby spurring home buying, he added.

"This bill has been long awaited by the industry. This is a major tax reform for our economy, which will transform India into a single market. Once implemented, it is likely to have a positive impact on the real estate sector, which has linkages with over 250 ancillary industries," said Anshuman Magazine, chairman - India and South East Asia, CBRE.

JLL India chairman and country head Anuj Puri said the Goods and Services Tax (GST) is the most radical taxation reform that is set to alter India’s economic prospects.

"The direct impact of GST on real estate, in terms of tax outflow for developers and consumers, will depend on whether the final GST rate is more or less than the taxes paid currently.

"Apart from the significant reduction in tax management expenses due to a single unified tax, the compliance costs will go down too," he added.

Stating that the real estate sector shares positive symbiotic relationships with more than 250 other sectors such as cement, steel, IT and BFSI, Puri said the benefits or drawbacks of GST on each sector will also have an indirect impact on real estate and vice versa.

"At this point in time, we may see very limited tangible benefits on the real estate industry but the cascading effects will definitely be higher," he added.

SARE Homes MD Vineet Relia said the implementation of GST is likely to improve transparency and reduce tax evasion on account of better enforcement and compliance.

"The home buyer in general could benefit from the introduction of GST if the rates are moderate," he added.

Abhishek Jain, Tax Partner, EY India, said, "India is on the brink of GST and this is considered as a sign of freedom from multiple taxes currently levied on the real estate sector and the end of myriad litigation owing to ambiguity in the legal provisions."

However, eligibility of credits and concessions still remain a cause of worry for the real estate sector.

"The Model GST Law restricts credit on goods and services acquired for construction of immovable property (other than plant and machinery). This clause is interpretative which may lead to litigation and result in denial of credits in certain situations," Jain said.

"The passage of Goods and Services Tax (GST) Bill is the biggest indirect taxation reform in the country. It would be a harbinger of change for the real estate sector which is currently plagued with a myriad of indirect tax issues both at the centre and state level," Neha Hiranandani, director, House of Hiranandani, said in a statement.

"We hope that the bill brings in a more comprehensive and uniform tax structure that will ensure greater transparency in the sector.

"The GST will enable a smooth and seamless distribution network in India which will lead to in-time delivery of building material across India," Hiranandani said.

Photograph: Reuters