For Indian real estate, a series of government-lead reforms, including implementation of Goods and Services Tax (GST), as also RERA, demonetization and the law on ‘benami’ ownership of property, will change how business is transacted in the real estate industry – for better.
The GST Council, in its eleventh meeting last week, gave in-principle approval to the two key draft laws of Central GST (CGST) and Integrated GST (IGST). Hon’ble Finance Minister Shri Arun Jaitley told media persons that the CGST and IGST law have been improved, and in next meeting, they expect to approve the SGST and UTGST law, which will then complete the legislative exercise and enable taking the same before Parliament. “This is a positive step, implementation of GST augurs well for real estate,” said Dr. Niranjan Hiranandani, CMD- Hiranandani Communities and Founder-President NAREDCO (West).
GST has been positioned as a comprehensive indirect tax on the sale, manufacture, and consumption of different kinds of goods and services throughout India. From a real estate perspective, the positive here is that all other central and state taxes are intended to be subsumed under it. Given this aspect, GST will have far-reaching implications on real estate, one of the positives will be uniformity across various states, he said.
Explaining this, Dr. Niranjan Hiranandani pointed out that taxation issues relating to real estate cover land, property and other kinds of work contracts, and for each, different kinds of taxes are levied by the state, central and local self -governments. “These are categorized across three aspects: (i) value of services, (ii) value of goods and materials, and (iii) value of land. So, while VAT is levied by state governments on the goods portion, value of services is taxed by the central government. Stamp duty is the tax on the transactions regarding value of land. Over the past few years, the situation has led to confusion and resulted in multiple-taxation. Compliance and implementation is difficult and leads to a situation, where a single real estate transaction results in multiple taxes that need to be paid. This resulted in a negative effect on real estate,” he added.
The Hon’ble Finance Minister last week expressed optimism about being able to meet the intended July 1 deadline for rollout of the indirect tax regime. “Implementation of GST will be a significant step in reforming indirect taxation in India. For real estate, possibility of double taxation would diminish, as some of the central and state government taxes will be amalgamated into one tax. This will ease the process of taxation considerably, making it easier to enforce and administer,” he concluded.
Dr. Niranjan Hiranandani is Founder & CMD, Hiranandani Group. His recent initiative is Hiranandani Communities. He is the Founder and First President (Maharashtra), National Real Estate Development Council (NAREDCO), which works under the aegis of Ministry of Housing & Urban Poverty Alleviation, Government of India.