Developers are in the process of evaluating the per unit benefit arising on account of GST implementation and most developers say there was a minor reduction in prices on offer passing on the cost savings.
In a report released on Tuesday, most developers claim that there has been a minor reduction in the prices on offer post the implementation of the Goods and Services Tax (GST).
The report by JLL and PwC, Impact of GST on residential markets, focused on two major aspects.
Developers are in the process of evaluating the per unit benefit arising on account of GST implementation and most developers say there was a minor reduction in prices on offer passing on the cost savings. Developers claim that it will have a positive impact on the real estate market in the future.
"GST has simplified tax treatment for the realty sector and has resolved some of the long-standing issues like valuation and tax type. It is seen as an additional benefit to consumers in the long-term. However, the significant benefit primarily would be around increased input credit on the procurement of materials, as per a report.
According to the report, currently, there is a lack of clarity among developers on the exact implications of GST. Developers believe that the exact impact will be understood only after a thorough analysis of the implications on each input cost (in the form of labour and raw material, namely steel, cement, bricks, etc.)
Abhishek Goenka, Partner and Tax Leader - Real Estate, PwC India said, "The benefit to the end customer would be seen primarily in projects executed post implementation of GST but the benefit may not be as significant as the government's expectation. The government should engage with stakeholders to address their concerns. This would help the market gain the needed momentum as anything related to the sector significantly impacts the sentiments of the economy."
The report summarises that the end consumers may be technically entitled to some amount of relief though not significant, whereas the builders would be better off explaining the rationale of passing on or not passing on this benefit depending on their fact pattern.
Ramesh Nair, CEO and Country Head, JLL India said, "GST has been a matter of discussion for both the demand and supply side of the real estate community. While a transparent uniform taxation system is good, the exact nitty gritties of 'how' to implement this needs to be addressed swiftly. The government has issued certain circulars to set clarity in this sector, however, the need of the hour is to set up discussion forums across locations and engage with tax authorities and developers at different levels. This alone can address the concerns of this sector which plays a significant role in impacting the overall sentiment of the economy."
Meanwhile, developers also feel that real estate will be impacted positively. Sarojini Ahuja, VP Sales & Marketing, Transcon Triumph, said, "GST may not be instrumental in lowering of land cost today, but in the long run it will surely benefit the stakeholders of this sector as the negative perception of the sector will eventually improve on the back of simplified tax structure and it will help cut the cash component as products will be sourced from permanently registered vendors to get tax credits. Overall, GST will have a positive impact in future."
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