5% GST without ITC (input tax credit) is a strong possibility that may happen anytime soon once the GST Council and Central Government give their nods. This move may bring strong relief to a large section of homebuyers.
How will homebuyers be affected by 5% GST
The next meeting of the GST Council is expected to be a major game changer for the Indian real estate sector. The outcome could benefit homebuyers to a large extent.
- The Council may consider the proposal to lower GST rates to 5% on under construction property without ITC (input tax credit) benefits.
- This can incentivize homebuyers with regard to purchasing property since they were not getting ITC benefits transferred to them earlier by developers.
- Real estate markets will be boosted since buyers will have to pay lower GST on the payments for under construction property.
- A flat rate without ITC will be best for buyers since ITC calculations and benefits are grey areas and depend majorly on developers.
Overall Impact on Real Estate Developers
- Sales spikes due to lower GST will benefit real estate developers and help them clean up balance sheets.
- Developers can only get maximum benefits of 5% GST without ITC when GST is lowered on input costs including steel and cement.
- A reduction in GST on cement will be a huge relief to builders if that is also approved by the Council.
- If GST is not reduced on input costs, developers may buy materials through alternative routes or pass on higher costs to buyers if they take the legal channel.
Effect on the Exchequer
- An increase in housing sales due to lower GST rates may equate to additional funds for the Government Exchequer.
- The present rate of GST at 12% is leading to buyers preferring ready to move properties with completion certificates which are exempt under GST and this is leading to lower revenues.
- A flat GST rate of 5% without ITC will prompt homebuyers to directly purchase under construction property and enhance revenue flow for the Government exchequer.
- The Government revenues will also be boosted from registration and stamp duty on a higher number of new property purchases.
5% GST without ITC may be a good move for the real estate market
5% GST without input tax credit (ITC) benefits may actually prove beneficial for homebuyers and the Government exchequer alike while it may spur sales growth for real estate developers as well. However, the corresponding GST on input costs could also be lowered to benefit the entire ecosystem.
