Ratings agency Care Ratings expects the implementation of Goods and Services Tax to result in reduction in property prices.
Currently, real estate developers pay various non-creditable taxes including excise duty, customs duty, entry tax, etc. on the procurement side. The buyers pay service tax and Value Added Tax on purchase of residential apartments when booked prior to their completion.
“The proposed GST will replace these multiple taxes with a single tax and will also ensure smooth flow of credits through the chain. Hence, it is expected that GST will reduce the construction cost incurred by the developers and thereby help in reducing the current level of property prices,” Care Ratings said in a report.
However, high GST rates will offset any possible gains on incremental credits. GST will also result in improved inflow of foreign funds in the real estate sector, as implementation of GST will improve the investor sentiments, Care said.
A committee headed by the Chief Economic Adviser Dr. Arvind Subramanian, submitted its report on the possible Tax rates under GST on December 4.