Mumbai: Benefits of the Goods and services tax (GST) for home buyers would majorly be seen in projects executed post implementation of the unified tax regime in July last year but may be below the government’s anticipation, says a report.
As per the report by JLL and PwC released here, while GST has simplified the tax treatment for the realty sector and has resolved some of the long-standing issues like valuation, the significant benefit appears to be only with regard to increased input credit on the procurement of materials.
“The benefit to end consumer (in residential market) would be seen primarily in projects executed post implementation of GST, but the benefit may not be as significant as the government’s expectation,” PwC India partner and tax leader (real estate) Abhishek Goenka told reporters here.
The report explained that increased input credit should ideally reduce construction cost but in an apartment, in addition to construction cost, the land cost also plays a significant role. As a result, the maximum benefit under GST would be available to projects that are executed post the new tax regime, while may not be significant for residential projects that neared completion close to implementation of the unified tax regime.
“In any case, for most projects, the estimated benefit (from GST) may not exceed 3 percent of the overall construction cost and may not translate into a significant reduction in prices for consumers,” it said.
It also noted that while savings is estimated to be in the range of 3-4 percent for customers, the cost of land involved in the project would “significantly impact the ultimate savings the end customer may derive under GST”.
JLL India chief executive officer and country head Ramesh Nair said that while government has issued certain clarification with regard to the implementation of GST in the real estate sector, “the need of the hour is to set up discussion forums across locations and engage the tax authorities and developers at different levels”.