The Goods and Services Tax (GST) has replaced multiple taxes and also offers full input tax credit, thus helping developers avoid double taxation.
The new indirect regime has also radically altered demand pattern with ready-to-move (RTM) properties, backed by completion certificates, finding favour with buyers as they do not attract GST. On the other hand, under-construction properties, that were earlier attractive due to cost arbitrage offered by developers, fallen out of favour with buyers as they attract 12% tax, along with full input tax credit. Buyers of affordable houses, especially from 12% to 8%.
There was confusion in initial days of implementation as developers tried to figure out how much benefit they could get out of input tax credit and changed raw material prices while buyers were left fuming over the increase in taxation.
To an extent, it has streamlined the real estate sector and brought increased transparency in the field. However, it still remains a halfway house, with stamp duty and registration charges outside GST ambit.
There was anticipation among buyers that GST will reduce property prices across India but this hope has not been realised. Property prices will soften only when stamp duty and registration fees are brought under GST.