Chennai: The introduction of Goods and Services Tax (GST) in Indian real estate has significantly impacted the home buyer with 67 per cent saying that the new tax policy in the last one-year has affected their buying decision as more and more consumers are now searching for ready-to-move-in over under-construction properties, revealed a study.
Responding to a consumer poll by Magicbricks, consumers were clear that tax cuts influence buying decisions. Currently, a buyer does not pay any GST charge while buying a ready-to-move-in property, while for under-construction properties one has to pay effective tax of 12 per cent. On a house worth Rs 50 lakh, GST charges would amount to Rs 6 lakh.
This tax has made many choose ready-to-move-in units as compared to under-construction properties, previously considered a cheaper option.
Even for affordable housing, to buy an under-construction property with Credit-Linked Subsidy Scheme (CLSS) benefits, the effective GST is eight per cent. So, a Rs 50 lakh affordable home with CLSS benefits will attract a GST of Rs 4 lakh, the study said.
The impact of GST also had its impact on consumer search trends as data shows that in the Jan-Jun 2018 quarter, about 80 per cent people searched for ready-to-move-in properties as compared to just about 20 per cent searching for under-construction units.
According to the study, over and above the property value and GST, consumers also have to pay stamp duty and registration charges, which are outside the ambit of GST now, as these are state levies. Property tax, on the other hand, is a municipal levy. Developers have been campaigning for lower GST rates for the housing sector to boost sales.
It must be noted that when GST rates were announced, the initial rates for real estate were 12 per cent and 18 per cent. These have since been revised to eight per cent for Affordable Housing and 12 per cent for other segments of housing.
GST has been the biggest reform for the Indian economy since 1947, and also a game changer for the real estate sector. It was rolled out in 2017. GST replaced numerous central taxes such as excise duty, countervailing duty and service tax as well as state taxes such as value-added tax, octroi and entry tax, local body tax, luxury tax, among others.