Real estate sector worried about raised costs due to GST

The implementation of the Goods and Services Tax (GST) has brought about a great change in the Indian economy. The real estate sector, in particular, has been affected by the new tax regime. The GST has replaced a number of indirect taxes on goods and services, including Value Added Tax (VAT), Service Tax, and Central Excise Duty. The real estate sector has come under the ambit of the GST, with different rates applicable to different types of properties.

The real estate sector has expressed concerns about the raised costs due to the GST. The sector is already facing a slowdown, which has been worsened by the demonetization of high-value currency notes in November 2016. The Real Estate Regulation and Development Act (RERA) has also impacted the sector significantly. The GST has added to the burden of the sector, which is already grappling with low demand, high inventory levels, and rising costs.

One of the main concerns of the real estate sector is the impact of the GST on the cost of construction materials. The GST rates for construction materials such as cement, steel, and bricks have been increased from the previous rate of 12.5% to 18%. This increase in the tax rate is expected to raise the cost of construction, which will, in turn, impact the prices of the properties. The higher costs may result in a slowdown in construction activity and may affect the affordable housing projects.

Another issue that has been raised by the real estate sector is the treatment of under-construction properties under the GST regime. Under the previous tax regime, the VAT and Service Tax were levied separately on under-construction properties. However, under the GST, under-construction properties are treated as a service and are subject to a GST rate of 12%. This has led to confusion among buyers and developers, who are trying to figure out the impact of the new tax regime on their projects.The real estate sector has also expressed concerns about the input tax credit (ITC) under the GST. The ITC is a mechanism that allows businesses to claim credit for the taxes paid on inputs used in the production process. Under the GST, the ITC can only be claimed if the developer is registered under the new tax regime. This has led to a situation where the unregistered suppliers are not able to claim the ITC, which may result in an increase in the cost of goods and services.

The real estate sector is also worried about the impact of the GST on affordable housing projects. The sector was hoping for a lower GST rate for affordable housing projects, which has not been granted by the government. The GST rate for affordable housing projects is the same as that for other residential projects. This may negatively impact the government's vision of providing affordable housing to all.

In conclusion, the real estate sector is facing a number of challenges due to the implementation of the GST. The raised costs due to the increased tax rates, the treatment of under-construction properties, confusion over the ITC, and the impact on affordable housing projects are some of the issues that need to be addressed. The sector is hoping for a resolution of these issues, which will help it to recover from the slowdown and contribute to the growth of the Indian economy.