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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

Markets open on negative note

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sensex

Mumbai, Jan 24: The 30-scrip Sensitive Index (Sensex) on Wednesday opened on a negative note during the morning session of the trade.

Later the Sensex move to a positive region.

The Sensex of the BSE after opening at 36,161.62 points touched a high of 36,163.68 and a low of 36,085.68 points.

On Tuesday the Sensex closed at 36,139.98 points.

The Sensex is trading at 36,165.75 points up by 25.77 points or 0.07 per cent.

On the other hand, the broader 51-scrip Nifty at the National Stock Exchange (NSE) opened at 11,069.65 points after closing at 11,083.70 points.

The Nifty is trading at 11,076.25 points in the morning.

IANS

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Enterprises now deploying AI technologies: Infosys

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Davos, Jan 23: Enterprises are moving beyond the experimentation phase with Artificial Intelligence (AI) and are now deploying AI technologies more broadly, said an Infosys survey on Tuesday.

There is a fundamental shift in how enterprises operate as AI takes hold, according to the “Leadership in the Age of AI” survey.

“AI, as the research shows, is becoming core to business strategy, and is compelling business leaders to alter the way they hire, train and inspire teams, and the way they compete and foster innovation. Industry disruption from AI is no longer imminent, it is here,” Mohit Joshi, President, Infosys, said in a statement.

“The organisations that embrace AI with a clearly-defined strategy and use AI to amplify their workforce rather than replace it, will take the lead, and those that don’t will fall behind or find themselves irrelevant,” Joshi added.

Seventy three per cent respondents strongly agreed that their AI deployments have already transformed the way they do business, and 90 per cent C-level executives reported measurable benefits from AI within their organisation.

Organisations are taking steps to prepare employees and business leaders for the future of work, with 53 per cent respondents indicating that their organisation has increased training in the job functions most affected by AI deployments.

More than 1,000 business and IT leaders with decision-making power over AI solutions or purchases at big organisations across seven countries were included in the survey.

IANS

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Market zooms: Sensex at 36K, Nifty50 at 11K

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Mumbai, Jan 23: Projection of India’s healthy economic growth outlook, along with bullish global cues lifted the key Indian equity indices to their new highs during the early morning trade session on Tuesday.

Accordingly, the S&P BSE Sensex and the NSE Nifty50 breached their previous respective intra-day high levels.

In the process, the barometer Sensex crossed the 36,000-points-mark and the NSE Nifty50 climbed above 11,000 points.

Market analysts pointed-out other factors such as positive Q3 results and buying support in oil and gas, banking, capital goods and consumer durables stocks aided in the key indices’ upward trajectory.

At 9.50 a.m., the 30-scrip S&P BSE Sensex, which had closed at 35,798.01 points on Monday, traded higher at 36,036.51 points, up by 238.50 points or 0.67 per cent.

At the National Stock Exchange (NSE), the broader Nifty50 quoted at 11,039.75 points, up by 73.55 points or 0.67 per cent.

IANS

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