The Impact of GST on the real estate sector.
India being a massively populated country, one would not doubt the growth of an industry like Real Estate. This sector plays a pivotal role in the economic fabric of the nation. It has seen such rapid growth in recent years that it now is the second largest employment generator after agriculture . Even though it has a whopping 5-6% contribution to the GDP, stipulating demand from over 250 ancillary industries, it still finds itself in the cusp of government regulations.
Construction services are already taxed by VAT and Service tax, and now stand to receive another blow with GST. Doesn’t it feel that way?
Several top real estate developers in Mumbai and elsewhere are bound to be affected. Well, maybe it’s not as bad as it sounds!
Here are 3 key reasons why GST will be a blessing for the Real Estate sector.
1. Transparency in the system.
In the current system, taxes are paid at different levels of procurement – Octroi, excise duty, entry tax, etc. This often leads to loopholes that vendors exploit to earn their cut. With GST, it will be easier to curb these malpractices. as it will bring a lot of required transparency and accountability, several real estate developers in Mumbai and developers/contractors across the country would reap the benefit of many taxes which will be subsumed by GST.
2. More affordable housing
Once the issue of repeat taxation is cleared, housing will be more affordable to the masses. More affordability = more demand. The issue of flats not being sold will be wiped away for good!
3. A common taxation system across India
In India, the taxation norms/options differ from each state. It usually leads to an overlap of taxes on a product. With GST, we can expect a uniform taxation system across the country simplifying business for everyone.
After taking a severe hit with demonetization, a new taxation system may just be what this industry needs to pick up its pace and bring the best real estate companies in Mumbai and other cities back into full fledged business. GST brings with it hope for all developers; hope that will reform the industry and scale it to new heights. Literally.