GST benefit for homebuyers in future, but nothing significant, says JLL-PwC report

By: | Published: April 18, 2018 1:33 AM

The report makes a strong case for the government to engage with developers and address the issues around the input credits and other complexities that have risen around the computation of different categories, including land cost and construction materials, after the implementation of the new tax regime.

GST, JLL PwC report, homebuyersThough the goods and services tax (GST) implemented by the government in July last year has simplified the tax regime and resolved some long-standing issues such as valuation and tax type for the real estate sector, the consumers might not see a significant reduction in property prices just yet, says a report. (Reuters)

Though the goods and services tax (GST) implemented by the government in July last year has simplified the tax regime and resolved some long-standing issues such as valuation and tax type for the real estate sector, the consumers might not see a significant reduction in property prices just yet, says a report. Buyers in new residential projects, or projects launched after July 1, 2017 — the date of GST implementation — might see a cost reduction of 3-4%, adds the report jointly made by real estate advisory and consultancy firm Jones Lang LaSalle (JLL) and business advisory and tax services firm PwC.

The report makes a strong case for the government to engage with developers and address the issues around the input credits and other complexities that have risen around the computation of different categories, including land cost and construction materials, after the implementation of the new tax regime. The report, which has been prepared after surveying developers, points out that there are grey areas and lack of clarity around major issues relating to input costs, raw materials etc, in the new tax regime, that both the developers and consumers are struggling to understand. And this is impacting the decision of individuals to buy and of developers to launch new projects.

The question the report raises is whether GST has achieved the primary objective of passing on the benefit of a transparent and uniform taxation system to end users by reducing the final price? And the answer it says is “may be not”, as the lack of clarity in areas of land valuation, computing tax liability and eligibility of input tax credits etc has led the developers to become more conservative. “This has also led developers to shift the additional tax costs and their related burden to end customers,” it said.
Primarily, the report said, the benefit would be around increased input credit on procurement of materials. Also, the affordable housing segment will be a clear gainer with a flat 8% GST against a 12.5% for general housing, and also the benefit of land cost savings, because of input credit mechanism.

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