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Impact of GST on Real Estate Sector

Goods and Services Tax - GST - By: - atul rathod - Dated:- 4-10-2016 Last Replied Date:- 5-10-2016 - :- Background:- Since the Model law of GST has come in public domain on 14.06.2016 and bill has been passed in Rajya Sabha and even expected to get effective from 01.04.2017. The purpose of this article is to give overview on due to change in Indirect tax structure. GST will play a major role in real estate sector as most of the purchases made by builder from unorganized persons, but in GST they .....

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ell as VAT. Whereas in GST Regime if the transaction is works contract, the same shall be deemed as supply of service . For example: If a customer is paying the service tax on 70% of value assuming it is finishing works where as in VAT also if the person pays on 70% of value, the person end up paying tax on 140% of value whereas in GST Regime the person end up paying tax only on 100% value. Increase in Margin: The key inputs for the builder are Steel, Tubes, Pipes etc. On purchase of said inputs .....

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ersa, whereas no such disputes is going to arise in GST. This will save litigation cost as part of the cases in litigation is around classification issues. No Cascading effect: In Current Regime of tax a builder is not eligible to take credit of CST on purchases made from interstate where as in GST the same is allowed as credit and there is no cascading effect to the extent of CST. However, Petrol & Diesel which is also key raw material of the Real estate has been kept out of the GST Regime, .....

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arge concept introduced but no concept of joint charge is available. Rate Contracts: It is expected that some of the industries going to have the inflation effect in price the movement GST come, hence it is an opportunity for the business to go for rate contract, where the Rate could be freeze for the next one year or case may be. By doing this a person may have edge over competitor. Reduction In Price: In GST Regime, the prices of Steel, Pipes and similar goods is expected to come down hence, t .....

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ling the assessments done by the Separate authorities for VAT, Service Tax, CST, etc. In GST Regime it is expected that assessment will be done by one authority to the extent of limit of turnover, if the turnover exceed prescribed limit than assessment going to be done by another authority. Electronic Mode for Forms: In current Regime of tax there is very much manual filing of documents such as initial declaration and other forms but in GST Regime there will be less manual filing of documents an .....

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e will be Business to Customer. However, the all credit will be eligible to Builder hence have to look whether the Builder is reducing the price to the extent credit available in GST or make it as his margin. Huge Impact in Working Capital : As in present Regime Most of the builder are paying the taxes on receipt basis, Whereas in GST Regime there is no provision of paying the tax on receipt basis. Hence the before receiving the amount, builder needs to pay service tax as on service is provided. .....

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also must be assessable to GST. Registration: Generally it is seen that Construction Company may have various sites in the country, in present regime he may take centralized registration and was adding the sites in registration certificate whereas in GST Regime construction company does not have any option and has to take registration in state wise which may increase the compliance cost. Reverse Charge on Goods: In Current Regime Of tax structure there was reverse charge on specified services b .....

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