AMITY LAW SCHOOL
TAXATION LAW
IMPACT OF GST ON REAL ESTATE WITH REFRENCE TO
STACKHOLDER
BY ARUN YADAV
B.A,L.L.B(H)
SECTION-F
ENROLLMENT NO:A11911115086
Acknowledgement
1
Prepare for your exams
Study with the several resources on Docsity
Earn points to download
Earn points by helping other students or get them with a premium plan
Guidelines and tips
Prepare for your exams
Study with the several resources on Docsity
Earn points to download
Earn points by helping other students or get them with a premium plan
Community
Ask the community
Ask the community for help and clear up your study doubts
University Rankings
Discover the best universities in your country according to Docsity users
Free resources
Our save-the-student-ebooks!
Download our free guides on studying techniques, anxiety management strategies, and thesis advice from Docsity tutors
Impact of GST on Real Estate: Study on Tax Structure Changes and Price/Stakeholder Effects, Exercises of Law
The impact of the goods and services tax (gst) on the real estate sector in india. The author, arun yadav, discusses the pre-gst and post-gst impact on real estate, focusing on the buyer, seller, and stackholder. The document also covers the downfall in sales of houses and the future of real estate. It provides insights into the research methodology, tax structure under gst, and the impact of gst on property prices.
Typology: Exercises
2018/2019
1 / 12
This page cannot be seen from the preview
Don't miss anything!
Related documents
Partial preview of the text
Download Impact of GST on Real Estate: Study on Tax Structure Changes and Price/Stakeholder Effects and more Exercises Law in PDF only on Docsity!
AMITY LAW SCHOOL
TAXATION LAW
IMPACT OF GST ON REAL ESTATE WITH REFRENCE TO
STACKHOLDER
BY ARUN YADAV
B.A,L.L.B(H)
SECTION-F
ENROLLMENT NO:A
Acknowledgement
I would like to express my special thanks of gratitude to
my teacher Mr Alok Verma who gave me the golden
opportunity to do this wonderful project on Impact of GSt
on Real estate with refrence to stackeholder which helped
me in doing a lot of Research and i came to know about
so many new things I am really thankful to them.
Secondly i would also like to thank my parents and friends
who helped me a lot in finalizing this project within the
limited time frame.
PROJECT NAME: IMPACT OF GOODS AND SERVICE TAX ON AI REAL ESTATE
WITH REFRENCE TO STACKHOLDER.
INTRODUCTION: IN THIS PROJECT WE HAVE ANALYSED THE IMPACT OF GST ON
REAL ESTATEIN INDIA. WE MUST ALSO UNDERSTAND THAT ‘REAL ESTATE
INDUSTRY’ INCLUDES ALL SELLER, BUYER AND STACKHOLDER. REAL ESTATE
IS ONE OF THE ORGANISED SECTOR IN INDIA AFTER INFORMATION
TECHNOLOGY. IT EMPLOYEES LAKHS OF PEOPLE BUT WITHIN SOME YEAR
THIS SECTOR IS FACING SOME SERIOUS PROBLEM AFTER DEMONETISIATION
AND INTRODUCTION OF GST.
STATEMENT OF PROBLEM: AS GST IS ONE INDIRECT TAX FOR THE ENTIRE
COUNTRY IT IS IMPORTANT HOW IT’S BIRTH HAS MADE IMPACT ON THE REAL
ESTATE INDUSTRY AND HOW BUYERS ARE EFECTED BY THIS TAX LAW. WE WILL
SEE HOW PRICES OF CEMENT , STEEL AND INCREASE IN THE RATE OF GST
HAD AFFECTED VARIOUS PROJECT AND REASON FOR DELAY
RESEARCH METHODOLOGY: DOCTRINAL
INTRODUCTION
The GST Council, on March 19, 2019, approved a transition plan for the implementation of the new tax structure for housing units, revenue secretary AB Pandey said. As per the plan, builders will be allowed to choose between the old
tax rates and the new ones for under-construction residential projects, to help resolve input tax credit (ITC) issues.
As per the decision taken by the GST Council, the developers of residential projects which are incomplete as on March 31, 2019, will have the option either to choose the old structure with ITC or to shift to the new 5% and 1% rates, without ITC. Builders will get a one-time option to continue paying tax at the old rates (effective rate of 8% or 12% with ITC) on ongoing projects (buildings where construction and actual booking have both started before April 1, 2019, but which will not be completed by March 31, 2019), Pandey explained. The new tax rate of 1% for affordable houses and 5% for others, without ITC, will apply on new projects.
On the time-frame for the transition, Pandey pointed out that the council has agreed on providing a reasonable time to developers. The matter would be decided in a next few days in consultation with the states, he said, adding that it could be 15 days or one month. The Council also clarified that projects with up to 15% commercial space will be treated as residential property. This will resolve issues faced in cases where buildings have commercial amenities, such as clubs and restaurants, as well as in case of residential-cum-commercial projects.
Additionally, a condition has also been imposed that 80% procurement by developers should be from registered dealers, to avail of the composition scheme. The new tax rates of 1% and 5% shall be available, subject to the condition that ITC shall not be available and that 80 per cent of inputs and input services shall be purchased from registered persons. Any shortfall in purchases according to these norms, would be levied a tax of 18 per cent. Tax on cement purchased from unregistered person shall attract a 28% duty.
The meeting deliberated on the transition provision and related issues for the implementation of lower GST rates for the real estate sector. The Council had, in its last meeting on February 24, 2019, slashed tax rates for under-construction flats in the affordable category to 1%. The GST rate on other categories was reduced to 5%, effective April 1, 2019. Pandey said the GST rates for new projects will be mandatory from April 1, 2019.
IMPACT OF GST ON REAL ESTATE
The construction of a complex building, civil structure, or a part thereof, intended for sale to a buyer, wholly or partly, is subject to 12 per cent tax with full input tax credit (ITC), subject to no refund in case of overflow of ITC. In other words, residential construction services, will invite GST at the rate of 12 per cent, which
sufficient to bring down the fresh tax liability to nil because of the taxes paid on other expenditures.
GST rates for real estate – Input materials
HSN Description of goods Rate Chapter 72 Steel 18 per cent 2523 Cement 28 per cent 6802 Marble and granite 28 per cent 2515 Blocks of marble and granite 12 per cent Chapter 68 Sand lime bricks and fly ash bricks 12 per cent 2505 & 2517 Natural sand, pebbles, gravel 5 per cent 8428 Lifts and elevators 28 per cent Data provided by: BMR
Under the tax regime, many of the construction materials are under the 18 and 28 per cent slab. For example, steel and steel products, are mostly in the 18 per cent segment and cement and prefabricated structural components for building or civil engineering, are in the 28 per cent slab. However, as the input tax credit is available on products utilised for construction, the overall tax incidence should be neutralised.
CONDITION OF STACKHOLDER IN REAL ESTATE
Investors are the people who always seek to earn the profit in the process of buying and selling of the home or property in the different areas of the country or the state or city. These are the people who buy the property in the cheap rates or lowered prices so that they can gain the benefit once that property increases its value and worth in times to come. They buy the homes and properties in the large amount and keep these with them in order to sell them at the right time where circumstances go in their favor. Once they see the country or government announces the favorable policies for the real estate industry and increases the property value of the properties and housing scheme, then investors would endeavor to exploit the opportunity and sell the properties they have earlier. This way, they would be able to take the commission or profit out that would be in the shape of the difference between the buying and selling price of the property and home. Their only purpose is to keep buying and selling the home in an effort to earn the profit and money out of that activity. Investors would go towards the specific neighborhood to buy the properties in that particular area or place in order to take the advantage of the potential future value and worth of the property they own now. As the matter of the fact, as per the usual discourse, the value and worth
of the home and property improve owing to the infrastructure developments taking place in the area. The real estate industry and the marketplace is the large market that has many important stakeholders that have the major and significant role in the smooth functioning of the market. These people have a direct interest in the performance of the market as any particular change or fluctuation in the market is likely to affect them in one way or the other. You must be familiar with the people involved in any market in the shape of buyer or seller of the product or commodity. Same is the case in the real estate market where there are three main stakeholders or community that have a major role in the running of the market in the form of a buyer of home or property, seller of the home or property and the most significantly, investors
Seller in the real estate marketplace
He is the one who has the intention to sell the property and home to the party or buyer who wants to buy in the particular area. He tends to find the buyer party who is willing to buy the property and home he has for the purpose of sell in the amount or value that can also bring a good amount of profit and commission to the seller. As the matter of the fact, the seller must have the property or home that has features and characteristics that can satisfy the demand and requirement of the buyer who wants to buy the home.
The buyer in the real estate marketplace
He is the major stakeholder in the real estate marketplace who has the money that is needed to float in the market to help run the real estate market. He buys the property in an attempt to attain the aim of having the dream home and house that must have the potential to fulfill the home-related requirements and needs. As far as the selling of a home is concerned, Homes for Sale in Algarve is the best option for you to fulfill the need of having the dream home that can satisfy you in every manner. In order to buy the home or house of your choice, you must be able to have the financial resources and money .
IMPACT ON DEVELOPERS / BUILDERS / CONTRACTORS
Under the previous tax regime, developers had to bear Excise duty, VAT, Customs duty, Entry taxes etc. on raw materials / inputs and Service tax on various input services like approval charges, architect professional fees, labor charges, legal charges etc. ITC was not available for duties like CST, Customs duty, Entry Tax
- Skyscrapers: Skyscrapers are expensive to construct and can only be economically justified when the cost of land is extremely high. Research has shown that the number of skyscrapers being built in an area is a good indicator of bubbles. In India, we see a large number of skyscrapers being built in areas like gurgaon which makes little sense given the sheer amount of open land available.
- 2014 elections: Real estate has been a great place for politicos to park cash in the past. When the elections come, they need to sell their assets to generate cash to fight the election.
- Everyone is talking about it: This is probably the best indicator. Everywhere you go, people are talking about how they can or already have made easy money in real estate. Bubbles can only survive till there are still people left who want to get in. When the music stops, the bubble bursts.
- Current account deficit: India has a significant current account deficit which will invariably lead to currency depreciation. This will stoke inflation which is already around 11%. This limits RBIs options and forces it to maintain a high interest rate. High interest rate = Expensive loans = Lower demand for housing.
CONCLUSION
The impact of GST on real estate sector is very much likely to be in the hands of buyers as the rate of tax can certainly delight with its economical zone. However, no pre-assumption can be made in the scenario as the real estate sector is a highly volatile industry and can fluctuate with high frequency.
The GST regime is intended to replace all multiplication of taxes and the builders will have to pay a larger amount in the 4-tier taxation but would take input credits eventually. The GST will be applied to the materials that is required by the builders for completing the residential projects. So, it will immediately affect the overall cost of building construction.
GST will decrease the value of purchasing houses for buyers as they have to pay Service Tax and VAT on purchase of residential unit when booked previous to their
completion, developers have to give excise duty, custom duty, CST, Entry tax which is non-creditable tax cost, on their professional side, which is covered in the cost of units.
BIBLOGRAPHY