A PropTiger expert has predicted the general service tax (GST) rate to be set at 18%, abatement of land at 25%, with 50% assumed to be the cost of construction goods, and the remaining 25% as cost of service. He also explains why the rate of GST on under-construction properties will stand at 13.5%. It is significantly higher than what is being paid currently. Based on this prediction, we can safely expect the cost of under-construction properties to rise once GST is in place. But the Modi government will apparently, once and for all, do away with people paying “tax on tax”.
Some of the most favoured realty destinations in India include Bangalore, Pune, Chennai and Hyderabad. While villas and plot-type gated communities have been a hot sell in such areas, people, for a while, had become wary about how the incumbent government will alter their fate. But things are looking up, as people who have chosen a sought-after neighbourhood, let’s say residential plots in Devanahalli Bangalore, or Madhapur Hyderabad, can rest assured.
All these years, people in some states, like Karnataka, Maharashtra and Haryana, needed to pay additional VAT, while people in state like Uttar Pradesh did not. This has been the reason of dispute for a while. Moreover, different VAT charges in different states make it worse. Maharashtra still charges 1% of the agreement value while Karnataka charges 5%.
One needs to keep in mind that service tax and VAT charges do not apply to properties that have the completion certificate and are ready to move in. Moreover, improvement in optimism doesn’t seem to have taken too much time to spring back after the slowdown effect caused by the incumbent’s “we mean business” stance.
Investment hot spots, such as the Nagaraja Engineering College area, with plots for sale in Chikkaballapur, and the KIADB-sponsored industrial hub, are already gaining huge prominence among buyers. Gated community plots in north Bangalore are among the most “liked” destinations on social media and with GST coming in, some buyers in Bangalore are relieved that they will not be the unlucky ones paying 5% VAT!
When an under-construction property is being purchased, as of now, developers charge a service tax. It has been going to the central government for the last few years. The tax has been applicable from July 1, 2010 and most people are still paying almost 4% of the cost of the unit as service tax.
Nowadays, people choose gated communities in India because they are full of facilities to help residents enjoy their time. They can enjoy amenities like indoor games, jogging trails, health spas and concierge services. Flats, on the other hand, come with the element of not having to worry about individual land transactions, and the amenities may be even better. It is fair to say that buyers have more and more Choice in Indian real estate: something that makes markets more stable and healthier.
Depending on whether it is a developed nation or a developing nation, the percentage of taxes, almost always, turns out to be respectively lower or higher. Now, the approval of GST by both houses of Parliament in India has brought an end to a period of speculation on one of the most awaited tax reforms. And the deadline of Q2 2017 for implementation of GST is fast approaching!
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