Impact Of GST On The Indian Real Estate Sector

Demonetisationhit the real estate sector. The Goods and Services Tax (GST), passed on March 29, 2017, also impacted the sector.

- Isha Chakraborty

Industry insiders are divided about the impact of this new taxation scheme. The real estate sector is a significant contributor to the country’s growth and is its second largest employing sector. The contribution of the sector is set to grow at a rate of 30% Compound Annual Growth Rate (CAGR) in the next ten years. It is expected to have revenues worth $180 billion by 2020.

Why GST?

GST was imposed in order to curb the effects of the multiple taxation system like VAT, central excise, and service tax and was aimed at creating a better market. This new taxation regime was expected to provide a boost to the GDP. The GST council has a four tier taxation structure - 5%, 12%, 18% and 28% are the tax slabs for different goods and services. The rates for the materials predominantly required for the real estate sector are given below.

Impact of GST on the market segments

Under the previous taxation structure, the tax always depended on the status of the construction or the property. If the property was under construction, then there was a different tax rate whereas if the property was complete, it had a different tax slab. The state in which the property was located also affected the tax rates and other duty charges.