January 19, 2018

Will home buyers get taxation relief to buy a property? This is what Goods and Services Tax (GST) Council will decide today in its 25th meeting.

High tax rates are acting as a deterrent for home buyers as the overall taxes for home buyers, inclusive of stamp duty and registration charges, are between 16.5 and 21% at present as compared to a maximum of 18.5% before the new indirect tax was rolled out on July 1 last year.

Apart from GST, home buyers continue to pay stamp duty and registration amount. Stamp duty rate varies from state to state. If the GST and state taxes are included, the outgo works out to be as high as 20% for some states to purchase a property.

Days before the Union Budget 2018-19 announcement, the Council will deliberate if it has to either reduce GST rate in order to bring down the overall taxation to within 12% or include stamp duty within the existing 12% GST rate.

There is a possibility of government making the revised tax rate applicable starting next fiscal.

"There were discussions in the earlier GST Council meeting of including stamp duty within the existing GST rate, but no decision was taken then. By subsuming stamp duty under GST, the sector or property buying will become more attractive," said Neeraj Sharma, director, Grant Thornton Advisory Pvt Ltd.

Different states have varied stamp duty slabs that range from 4-8% and it also differs depending on whether the property is owned by a male or female.

If GST Council decides to combine GST and stamp duty, the earnings of Central, as well as some state governments are likely to be affected due to a decrease in the tax rate.

However, industry players are of the view that lowering the tax rate will help them in increasing sales, thereby the revenue collections remaining unaffected for the governments.

According to National Real Estate Development Council president Niranjan Hiranandani, if GST rate is brought down to 6%, there is a potential of increasing housing sales tenfold. As part of their demands and expectations from the government in the Budget, the industry body had put forth their demand to decrease GST rate.

With the real estate sector sitting on a huge inventory pile, the decision to cut the overall tax rate on home purchases may help developers clear the same.

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Source: dnaindia.com