Amaya Properties October 5th, 2017 Real Estate 1,901 views

GST And Its Implications On Home Investment In Ahmedabad

GST is hailed as the most significant tax reform since India gained independence. Not only is it the most talked about tax issue in recent times, but is also the most awaited in the Indian market especially in the fast developing cities such as Ahmedabad. Good investment opportunities in real estate in Ahmedabad stand to benefit out of this tax.

GST, a uniform tax regime, replaces all other indirect taxes such as VAT, Excise and Service Tax. The business of real estate development is categorized as a service under the GST regime. A real estate developer is required to register as provider of “construction services.”

How exactly the GST will impact the rates of investment or real estate purchase in Ahmedabad and pan India is still unclear but based on the new tax structure, it is expected that the property buyer should benefit from the change in the cascading effect of taxes that existed, where a tax is paid on tax by the intermediary and the value of the item keeps increasing every time this happens.

The government has envisaged that all manufactures, traders and service providers will pass on GST input credit to their respective consumers, thereby avoiding duplication of tax and resulting in lower cost of product or service to the consumer. This initiative comes in as a big relief for real estate investors across India.

Under GST, there is a way to claim credit for tax paid in acquiring input by the intermediaries. The intermediaries can be a manufacturer, supplier, agent, aggregator, developer or any of the persons registered under GST. What happens in this case is, the intermediary who has paid a tax already can claim credit for this tax when it submits its taxes to the government. So in the real estate industry right from the acquisition of goods, to addition of value by contractors and developers on goods and through services, which attract taxes, will be allowed to take input tax credit.

One of the key elements of the GST scheme for real estate investors in Ahmedabad (as well as India) is that these intermediaries are required to pass on the benefit of any utilizable input credit that becomes available to them which in turn should have a direct impact on the purchase cost for the buyer.

For the ongoing projects where the construction is partially complete, the benefit of input tax credit will likely be available only on the balance input cost to be incurred in the GST regime.

A real estate developer is required to pass on any utilizable GST input credit to the purchaser, which may result in reduction of sale consideration.

For the new buyers, the fair and transparent pricing policies from developers will become an important consideration when it comes to realizing benefits intended by GST. Amaya Properties in ahmedabad is one of the real estate developers, who has always adopted transparent pricing policies.

The real estate business consumes many commodities, products and services. Each industry and service provider will need to figure out the impact on their business and how to create efficiency while protecting their margins. Industry experts believe that it will take some time before true efficiency of GST will be passed along to the consumer but it is becoming more and more apparent that the built-in efficiencies of GST presents a great opportunity for home buyers in ahmedabad looking to invest in a home.