Goods and Services Tax - Real Estate - ApnaComplex

Impact of GST on Co-operative Housing Society and Real Estate

Basic Introduction of GST and its Perspective as a Contractor and a Developer
GST (Goods and Services Tax) is one indirect tax for the whole nation, which is meant to be a unified indirect tax across the country on construction services and will make India one unified common market. The present structure of Indirect Taxes is very complex in India. There are so many types of taxes that are levied by the Central and State Governments on Goods & Services. It has been long pending issue to streamline and subsume all the different types of indirect taxes and implement a “single taxation” system called “GST”.

Implementing the GST will ease the compliance, uniform the tax rates and structures, remove the cascading effect of taxes levied by States & Centre, will improve the business competitiveness and will benefit everyone doing trade in some or the other form whether as a contractor or as a developer.

In the current system in India, tax is levied at each stage separately, by the Centre and the State, at varying rates i.e. 10.5% / 6% / 4.5% for service tax and different rates by different States, on the value of construction services. But under the GST system that is set to be introduced, tax will be levied only on the value added at each stage by the sub‐contractors, main contractors and developers or builders. It is a single tax collected at multiple value additions with a full set‐off for taxes paid earlier in the value chain by sub‐contractors and main contractors. It is pertinent to note that the inter credit of different taxes paid in the current regime be a service tax, VAT, CST, etc. to Centre or States are not allowed and thus becomes a part of the cost on the suppliers. Thus, under GST the final buyer / client will bear only the GST charged by the last person i.e. developer or builder or the contractor.

Structure of GST in India

In India, a dual GST is proposed whereby a Central Goods and Services Tax (CGST) and a State Goods and Services Tax (SGST) will be levied on the taxable value of every transaction of supply of goods and services.

The Dual GST is expected to be a simple and transparent tax with one or two CGST and SGST rates. The structure of the model law comprises of CGST Act, SGST Act and IGST Act. The dual GST model would give adequate flexibility to the States to levy taxes on a comprehensive base of goods and services at all points in the supply chain. Thus, financial liberty of the States would be maintained. GST is a consumption based tax. It is based on the “Destination principle”. GST is applied on goods and services at the place where actual consumption materializes.

GST on Co-operative Housing Societies

The Centre and the States would have parallel jurisdiction for the entire value chain and for all taxpayers. The administration of GST under the three components will be as under:

  • Central GST (CGST) – to be levied on intra state trade and administered by the Centre
  • State GST (SGST) – to be levied on intra state trade and administered by the State Governments
  • Inter‐State GST (IGST) – to be levied on inter‐State trade and administered and collected by the Centre.

To the extent feasible, uniform procedure for collection of both Central GST and State GST is prescribed in the respective legislation for Central GST and State GST.

It can be noted that IGST will not be a Tax in addition to the SGST and CGST so one should not presume that IGST is a third tax but it is only a mechanism to monitor the interstate trade of Goods and services and further to ensure that the ultimate SGST is gone to the consumer state since the GST is a destination based tax.

Impact of GST on Co-operative Housing Society as well as Real Estate Sector
Implementation of the GST law will have a positive impact on the Co-operative Housing Society and on the real estate sector with expected reduction in its tax burden. The law will single‐handedly solve many of the challenges faced by the real estate sector. Heavy taxes that are being borne in a non‐transparent manner are expected to be very transparent in GST. It is unclear what would be the rate of GST applicable on construction services, hence it would be difficult to confirm the exact impact on GST on the Co-operative Housing Society. However going by the informal discussion, it is learnt that the rate is expected to be something between 18‐20%, which is what the current rate directly and indirectly being borne by the construction sector. Besides the simplicity in taxation, GST would bring in other advantages like transparency, seamless credits, ease of business by lack of border controls, promoting economic efficiency through a destination based taxation system. Overall Construction costs would be reduced to some extent which would benefit the end consumer. Apart from the advantages, the complexities in the compliance and assessments shall also be greatly reduced as the tax laws would also be unified.

There would be lesser burden of tax on purchases of major inputs like cement and steel, as tax credits would be available for set off at various stages which are currently restricted. The restrictions on credit utilization would be eliminated, thus strengthening the credit chain in the system. If this so happens, there will be increased credits available in the procurement chain and hence better utilization of input tax costs towards output GST Liability.

Since GST may be levied on a single value, the current issue of levying tax on tax (VAT on central excise duty) is likely to be removed. Hence the cascading effect of taxes shall be removed with the resulting transparency which will significantly reduce tax evasion through more efficient transaction‐tracking methods, and improved enforcement and compliance. Hence the implementation of GST will enhance the investment in Housing Societies & real estate sectors.

It is widely expected that GST would reduce the construction cost in the hands of developer and thereby aid in reducing or at least maintaining the current level of prices in the housing societies as well as in the real estate sector.


Investments in Indian real estate sector slumps by 6 percent in the last four years, Assocham survey reveals

DeclineInvestments from various private and public sources in the Indian real estate sector have slumped by 6 percent in the last four years, a survey by Assocham revealed. Investments in the real estate fell from Rs Rs 15.2 lakh crore in 2011-12 to Rs Rs 14.3 lakh crore in 2014- 2015.

As per a poll conducted by Assocham, the real estate projects that grabbed about 76% of the investments remained non-starter during the 2011-12 to 2014-2015 period.

The top 5 states that grabbed the maximum share in total real estate investments are:

  • Maharashtra – 21%
  • UP – 14%
  • Gujarat – 13%
  • Karnataka – 12%
  • Haryana – 8%

Clocking a compounded annual growth rate (CAGR) of about 82 per cent, Assam has recorded maximum growth in attracting investments in the real estate sector during 2011-12 and 2014-15 followed by Bihar (19 per cent), Odisha (17 per cent), Uttar Pradesh (16 per cent) and Uttarakhand (12 per cent) amid top five states in this regard.

The states that registered maximum fall in real estate investments are:

  • Jharkhand – 40%
  • Himachal Pradesh – 37%
  • MP – 29%
  • Haryana – 16%
  • Gujarat – 7%

The survey was based on the feedback taken from 100 big and small realty companies based in top cities such as Pune, Mumbai, Lucknow, Jaipur, Indore, Hyderabad, Delhi, Chennai, Bangalore and Ahemdabad to ascertain the budget implications.

About 75% of the real estate developers were unhappy with the government’s lack of focus on improving demand and supply situation in the real estate sector. The survey also indicated that the realty sector was disappointed with exclusion of 100 Smart Cities plan from the Union Budget.

In addition, the increase in service tax rate to 14% will make the real estate more expensive and impact the sales as well since it would decrease the purchasing power of an average consumer.

Real estate developers are also concerned about increase in service tax on construction and excise duty on input goods, as also increased on petrol and diesel coupled with increase in freight rates on cement will lead to rise in construction costs.

Referring to urgent need for speeding up procedural requirements for real estate sector, the real estate industry has pressed for a single window clearance system for various approvals leading to operational efficiencies and cost saving, along with need for a predictable and stable policy framework. Ownership-wise, private sector accounted for 85 per cent of the total investments attracted by the real estate sector across India while government/public sources accounted for remaining share of merely 15 per cent.

Source: Economic Times 


Real Estate Bill Ready for Cabinet Nod

RealEstateBillThe NDA government led by BJP is now all set to push the real estate bill to curb black money circulation in the real estate sector. The bill also talks about commencing a buyer grievance redressal system.

The government wants to make the sector consumer friendly for the middle class by making the real estate transactions more transparent and ensuring that this particular sector does not cater only to the rich.

As per government sources, Narendra Modi seems to be keen on the real estate bill expedition since it will protect the consumers from the dubious players in the real estate market.

In December 2014, the Real Estate (Regulation and Development) Bill had come up in the cabinet, but was deferred. Presently, a new cabinet note is ready for government’s approval.

Housing and Urban Poverty alleviation, the nodal ministry has removed the bar on buyers approaching consumer forum in case of any dispute. By addressing concerns over project completion timeline, redressal and funding transparency, the bill aims to help genuine buyers.

Under the new government, the ministry, after discussions with stakeholders, sent a note for the Union Cabinet’s approval in December. The Modi government amended the UPA bill to cover commercial properties. The earlier bill covered only residential real estate. The government also snipped the quantum of receivables from buyers that have to be kept in escrow account for other ventures from 70 per cent to 50 per cent, to ensure that consumers’ money was not diverted to other projects before delivering the earlier ones.

Meanwhile, the Supreme Court had also expressed concern over the delay in setting up a real estate regulator to keep a check on activities of realtors.

Source: Hindustan Times 


New airport at Jewar to boost Noida real estate sector

18india-airport7The corporates in Delhi/NCR region are generally in a fix to choose between Gurgaon and Noida to set up their offices. Most of them choose Gurgaon due to its airport proximity. However, with the new airport coming up at Jewar, Yamuna Expressway near Noida, the tables might turn drastically.

Sources from a property research firm revealed that the new airport might help in boosting up the sales of the region, which have been showing a downward trend in the past few years. Noida has been losing out quite a bit since it was not in close proximity to an airport. The new airport is expected to increase the demand for offices in Noida, which in turn will increase the demand for homes.

An architect and town planner, Hafeez Contractor revealed to Economic Times – “A new airport transforms an area. Noida and its surroundings could get transformed from a poorer suburb of Delhi to an affluent one. A new airport near Noida will change the face of the area. Roads will change and get lit up, law and order will improve, hotels will come up and the area will get cleaned.”

Bengaluru seemed to experience a similar activity in the past. People were apprehensive about the launch of the new airport 20 kms away from the main city. However, today the main city seems to be moving towards the airport with immense development taking place in the areas nearby to the Bengaluru airport. The new airport at Jewar is expected to improve connectivity and encourage tourism in Mathura and Agra due to its strategic location.

Quite a few developers such as Jaypee, Gaursons, ATS and SuperTech have commenced real estate projects on the Yamuna Expressway in the last few years. Currently, there would be around 30,000 apartment units under construction. The sales were showing an upward trend in the initial years, after which there has been a major slowdown. The announcement of the new airport has now stirred up some movement in the new Yamuna expressway area.

Source: Economic Times   


Bengaluru to grab maximum office space in 2015

Office Space

Office Space

With the growing population in India and a significant number of youth now engaged in the IT/ITes sector, BFSI, pharma sectors, the number of offices in India is increasing rapidly. Not only the prospective employees are looking for jobs but the prospective employers are looking frantically for a space for them to employ people and provide them with a decent work space.

As per a recent report published by Cushman & Wakefield (C&W), a globally renowned real estate consultancy firm; Bengaluru, the IT capital of India is expected to absorb the maximum office space in comparison to other major cities in India.

Overall, India is expected to absorb approximately 36.8 million square feet (msf) office space in 2015. The  demand for office space in India will be mainly driven by growth in the corporate activities undertaken by both domestic and global companies.

Bengaluru is expected to grab the maximum office space of nearly 11.1 msf with NCR following the same with grabbing about 6.8 msf office space.

The report reveals that the figures above show considerable improvement in comparison to 2013 and 2014, implying remarked improvement in overall macro-economic scenario, political stability and business sentiment.

This trend of absorbing more office space is expected to pick up in second half of 2015 and continue in 2016. Major cities in India are expected to have a robust supply pipeline of office space in 2015 except Hyderabad wherein the demand is expected to be more than supply.

The demand for office space is mainly driven by sectors such as BFSI, manufacturing and pharmaceutical sector, banking and majorly by IT-ITeS. The overall increase in supply of office space is expected offer options to tenants to choose and negotiate till they firm up on the best option for themselves both in space and the rent they pay.

Source: Economic Times 


Are you Ready to Invest In Real Estate? Your Check List is Here!

When it comes to property investment, timing is everything. Ultimately, choosing the right time to enter the market will have a significant impact on the long-term success of your investment.

But how can you, as an investor, know whether the timing is right? Here are 10 tell-tale signs that now is the time to start building your investment portfolio.

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1. You are financially ready. You have saved enough for the down payment and you have also established your emergency fund. You have taken into account home maintenance expenses. Your credit history is good and you are able to meet all the financial obligations.

2. You have set your long-term goals. You have a clear picture in your mind of your investment’s purpose and you are flexible enough to adjust to changing circumstances. You are not hesitant. When the timing is right, you are able to adapt to the market needs and the development of technologies.

3. You have done your research. You know the neighborhood of your future property well enough to foresee the coming trends and the possible changes in the community. You have researched all the schools in the area as well as the best commuting means.

4. You have chosen a stable economy. The area is financially stable, economic trends are promising and equities are surging. No demographic fluctuation or no irregular variation of population have been recorded in the area.

5. You understand the country’s policies regarding real estate. The policies of the region promote and encourage a positive, innovative environment as well as drive further economic growth. The tax policy in the country is positive for homeowners. Global innovation index is rising in the area.

6. Infrastructure projects are underway and likely to lead to an increase in property values. The infrastructure of the area is being developed with a focus on: transport, energy, solid waste and water management developments.

7. The region is moving toward sustainable development. The region’s awareness of global and local environmental issues is increasing, the demand for eco-friendly homes as well as for sustainable rural and urban development is rising. As more and more people head toward sustainable living, investing in sustainable property will increase its value in the future.

8. The location draws a lot of interest. Whether it is the best travel destination or the hot jobs spot, the location is always on the top of the search engine. It has become a successful start-up hub already or is planning to do so in the coming years, driving a lot of job seekers into the area. The number of enrolled students is increasing every year and the area draws interest of international students.

9. You have found a reliable real estate agent. It’s particularly crucial to have a reliable representative. Your real estate agent is trustworthy, knowledgeable, and knows the local market well enough to be able to help you make the right choice.

10. You have researched local differences in the property market. Whether you plan to invest in a residential property and turn it into a rental or an office space, you are fully aware of all cultural differences that might occur when you deal with a property seller.

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