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Impact of GST on real estate: What you should know

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GST

Goods and Services Tax or GST is being touted as a revolutionary tax reform that India has seen since Independence. It is expected to reduce the tax burden of India by eliminating the complex and confusing tax structure. However, whether the new tax system will succeed in giving us the desired results, is something we will have to wait and assess.

If you are interested in property, you must be waiting with folded arms to understand the impact of single indirect tax-structure regime on real estate sector before you invest. So, here are the key points for you to understand what GST means for real estate –

  1. The central government has fixed 18 per cent GST rate for under-construction properties with full Input Tax Credits (ITC) for the real estate sector. The rate of 18 per cent includes 9 per cent State Goods and Services Tax (SGST) and 9% Central Goods and Services Tax (CGST). Deduction of land value equivalent to one-third of the total amount charged by a developer, is excluded from this, making the effective tax rate as 12per cent.
  2. The implementation of GST has reduced the tax burden on those home buyers who are planning to buy ready-to-move-in apartments. As the tax on the entire cost of the housing project, including the land, will be levied at about 12 per cent, it is enough for the developer to claim input credit. Therefore, buying OC-ready projects are cheaper for home buyers.

Home buyers are now showing more interest in ready-to-move-in properties. This trend had already started after RERA came into picture.

Under-construction projects involve several risks, such as project delays, which actually doubles up the cost for the home buyers. Though buying ready-to-move-in projects is a bit costlier than the under-construction projects, but now post GST, ready-possession homes are going to be the preference of the home buyers in India.

  1. As of now, stamp duty and registration charges are kept outside the ambit of GST. The states have been opposing their inclusion on GST as stamp duty is levied by states, while property tax is levied by municipal authority. But the government plans to subsume them in GST in future. When and how it will be done is yet to be seen.
  2. Since GST is a new Act, compliance has become an issue. This has created a lull in the market as developers are busy correcting their books. What comes as a little respite to the developers is the announcement by the government that a detailed return need not be filed by traders/businessmen and a summary return is sufficient this year.
  3. First the implementation of Real Estate Regulatory Act (which requires developers to register themselves and their projects) and then GST has created an environment of initial confusion in the market. Therefore, teething issues are inevitable. And, they are likely to be there for at least 12-15 months, as per the experts.
  4. GST brings both pains and gains for the economy and real estate sector is no exclusion. Where there are gains, such as easier redressal of tax issues, no overlapping jurisdiction between Centre and states, there are pains, related to classification, composite and mixed supplies, etc. Transition period will be a pain for developers and consumers as well.
  5. For developers, the unregistered vendors have become a headache. Earlier, the liability to pay taxes was on the provider of goods and services, which has now shifted to the receiver. This means that any purchase from an unregistered dealer will attract a reverse charge on the one who is receiving. As it will add to the compliance cost of the buyer, the developers will now not like to make purchases from the unregistered dealers.
  6. There is another aspect of GST’s impact on real estate, which people are now gradually talking about. It is their impact on the home loans. On financial services, the GST of 18 percent is applicable. Therefore, banks’ charges on loan processing have escalated. The higher the cost of your house and the loan on it, the higher will be the processing charge on your loan.

By Preeti Pandey

Business

Key Indian equity indices open flat

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SENSEX NIFTY MARKET

Mumbai, June 25: The key Indian equity indices on Monday opened on a flat to negative note.

The 30-scrip Sensitive Index (Sensex), was trading 20.89 points or 0.06 per cent lower soon after opening.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) was also trading 9.20 points or 0.09 per cent lower at 10,812.65 points.

The Sensex of the BSE, which opened at 35,783.75 points, was trading at 35,668.71 points (at 9.16 a.m.), lower 20.89 points or 0.06 per cent from the previous day’s close at 35,689.60 points.

The Sensex touched a high of 35,806.97 points and a low of 35,658.19 points in the trade so far.

IANS

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Market Review: Amid volatility equity indices rise for 5th straight week

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SENSEX NIFTY MARKET

Mumbai, June 23: Despite volatility and a broadly bearish momentum, the key Indian equity indices rose for the fifth consecutive week, although with marginal gains.

Value buying by investors, primarily in banking, healthcare and auto stocks on Friday helped the indices end higher than the previous week’s levels.

The gains in the week ended Friday, were limited by global trade war concerns due to imposition of tariffs and counter-tariffs internationally.

Index-wise, the barometer 30-scrip Sensitive Index (Sensex) of the BSE rose by 67.46 points or 0.19 per cent to close at 35,689.60 points on a weekly basis.

The wider Nifty50 of the NSE closed the week’s trade at 10,821.85 points — up 4.15 points or 0.04 per cent — from its previous close.

According to analysts, market breadth was negative in all the five trading sessions of the week.

“Markets ended the week with marginal gains after trading in a rangebound manner for a major part of the week. It was nevertheless the fifth consecutive week of gains for the Nifty50,” said Deepak Jasani, Head of Retail Research at HDFC Securities.

Shibani Kurian, Senior Vice President and Head of Equity Research at Kotak Mutual Fund told IANS: “Volatility in the market continued during the week ended June 22, 2018 amidst rhetoric of intensifying trade wars between the US and China and the possibility of imposition of further tariffs against imports from China.”

According to Equity99’s Senior Research Analyst, Rahul Sharma, stock specific actions were the flavor of the week, “wherein HDFC twins (HDFC, HDFC Bank) shimmered, gaining more than 2 per cent”.

Further, during the week all eyes were on the outcome of the Organisation of Petroleum Exporting Countries’ (OPEC) meet, said Prateek Jain, Director of Hem Securities. OPEC, was expected to decide on raising its oil production to cool down oil prices and eventually on Friday it announced an agreement to raise oil output by nearly one million barrels per day.

On the currency front, the rupee closed at 67.84 against the US dollar appreciating by 18 paise from its previous week’s close of 68.02 per greenback.

In terms of investments, provisional figures from the stock exchanges showed that foreign institutional investors sold scrip worth Rs 2,088.81 crore, while the domestic institutional investors purchased stocks worth Rs 4,720.76 crore during the week.

Figures from the National Securities Depository (NSDL) revealed that foreign portfolio investors (FPIs) divested equities worth Rs 4,528.63 crore, or $665.71 million, in the week ended on June 22.

Sectorally, the top gainers were the Bank Nifty, pharma and energy indices, while the top losers were metal, public sector banks and IT indices, Jasani told IANS.

The top weekly Sensex gainers were ICICI Bank (up 6.57 per cent at Rs 300.85); HDFC (up 3.86 per cent at Rs 1,902.40); HDFC Bank (up 2.52 per cent at Rs 2,081.80); Tata Motors (up 1.63 per cent at Rs 308.15); and Yes Bank (up 1.41 per cent at Rs 335.20 per share).

The major losers were Coal India (down 5 per cent at Rs 265.10); Vedanta (down 4.23 per cent at Rs 228.65); ONGC (down 3.63 per cent at Rs 159.45); Wipro (down 3.34 per cent at Rs 257.95); and Infosys (down 2.66 per cent at Rs 1,246.45 per share).

IANS

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Oil prices rally after OPEC meeting

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OPEC

Vienna, June 23 (IANS) Oil prices surged as investors were closely watching the Organization of the Petroleum Exporting Countries (OPEC) meeting.

The West Texas Intermediate for August delivery on Friday rose $3.04 to settle at $68.58 dollars a barrel on the New York Mercantile Exchange, while Brent crude for August delivery was up $2.50 to close at $75.55 a barrel on the London ICE Futures Exchange, Xinhua news agency reported.

The OPEC on Friday announced an agreement to raise oil output which, in accord with non-OPEC producers, had been reduced last year in order to boost prices that had been in free fall mainly due to a supply glut.

Following a ministerial meeting here of the 14-nation cartel, the statement released, however, did not provide any details of the production increases to be allocated among members.

Current OPEC Chairman, the UAE Energy Minister Suhail Mohamed Al Mazrouei, told reporters after the meeting that the increase agreed upon is “a little bit less than 1 million barrels” over OPEC’s current output.

OPEC and non-OPEC producers, including Russia, had put in place 1.2 million barrels per day (bpd) cut from January 2017, which helped boost crude prices go over $80 a barrel last month.

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