On July 1, 2017, India rolled out the long-overdue Goods and Services Tax or GST as it is more popularly known.
With the first anniversary of this revolutionary reform approaching, we spoke to
Niranjan Hiranandani, President of the National Real Estate Development Council (NAREDCO) to understand what worked, what did not, and the improvements required to make it a success for the real estate sector.
Here are the excerpts.
What are your views on the impact of GST on real estate?
GST, has, undisputedly, been the biggest reform for the Indian economy since 1947. It resulted in the implementation of the ‘one nation, one market, one tax’.
This effectively stopped the unwanted practice of double taxation, which was earlier adversely affecting the real estate sector.
How has it benefited homebuyers?
The initial GST rates announced for real estate were 12% and 18%. These were revised to 8% for affordable housing and 12% for other segments. This has created something which is not a level playing field. A common rate of 6% applicable to all categories of housing would be better.
Further, there is no GST for ready properties, while for under-construction properties it is levied at 12%. In effect, it creates a situation where a homebuyer feels it is better to invest in ready-to-occupy properties to save 12%.
GST’s impact is being acutely felt in under-construction stage sales. Homebuyers opting for ready homes has become a new trend.
What solutions do you propose for these problems?
- Reconsider the levying of GST at 12% on under-construction homes.
- Subsume stamp duty and registration charges into GST. This will ensure that the total amount payable by the homebuyer will come down drastically.
- There should be no further hike in the GST rate.