The real estate sector is one of the most prominent contributors to the Indian economy. However, the sector has been going through a slow phase due to various factors such as high prices, low demand, and inadequate financing options. In a bid to revive the sector, the government has announced a reduction in the tax outgo under GST for home buyers. This move is expected to provide a much-needed boost to the sector and encourage more people to invest in properties.
Goods and Services Tax (GST) is a comprehensive tax system that was implemented in India in July 2017. It has replaced various indirect taxes such as VAT, excise duty, and service tax. It is a single tax that is levied on goods and services across the country. GST is divided into three categories - CGST (Central Goods and Services Tax), SGST (State Goods and Services Tax), and IGST (Integrated Goods and Services Tax). The rates of GST vary depending on the nature of the goods or services being taxed.
Under the GST system, home buyers are required to pay a tax on the purchase of under-construction properties. The tax rate is 12% of the property value, which includes both CGST and SGST. However, this tax is not applicable to ready-to-move-in properties. This tax burden has been a major deterrent for home buyers, and many have been forced to postpone their purchase decisions.
In a recent announcement, the government has allowed home buyers to avail of a reduction in the tax outgo under GST. Under this new provision, home buyers can claim a refund on the tax paid on the purchase of under-construction properties. The refund will be calculated based on the affordable housing segment's rate of 8% and the non-affordable housing segment's rate of 12%. This move is expected to provide relief to home buyers and encourage more people to invest in properties.
To claim a refund, home buyers need to file a Form GST RFD-01 on the GST portal. This form needs to be filed within two years from the date of payment of the tax. The refund amount will be credited to the home buyer's bank account directly.
The reduction in tax outgo under GST is expected to have a positive impact on the real estate sector. It will make properties more affordable for home buyers, leading to increased demand for under-construction properties. This, in turn, will boost the construction sector and create job opportunities. Moreover, it will encourage more developers to invest in affordable housing projects, which will address the housing shortage in the country.
The reduction in tax outgo under GST for home buyers is a welcome move by the government. It will provide relief to home buyers and encourage more people to invest in properties. The move is expected to boost the real estate sector, which has been going through a slow phase. If implemented effectively, this provision can go a long way in addressing the housing shortage in the country and providing a much-needed boost to the economy.
Section 194A of the income tax act
GST Compliant Business: Benefits & Advantages
Valuation of Supply under GST