The roll out of the Goods and Service Tax Act (GST) a year ago, aimed at “One Nation, One Market and One Tax”, has resulted in a successful tax reform. GST was long needed to establish a robust tax regime, to spread across the length and breadth of the nation. In that sense, GST has undisputedly been the biggest reform for the Indian economy since 1947 with a paradigm shift for the real estate industry.

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GST is definitely a game changer for the Indian economy, including real estate, which has witnessed positive impact a year down the line.

Across the economy, some of the large industry players are happy to avail the benefit of input tax credit mechanism, which has not been the case for the real estate industry - GST is not levied on the sale of the building after receiving occupation certificate; as a result, full set off in terms of input tax credit does not happen and the benefit gets lost.

When GST rates were first announced, the initial rates for real estate were 12% and 18%.

These have since been revised to 8% for affordable housing and 12% for other segments of the housing. This has created something which is not a level playing field, and it is in the interests of home buyers as also the real estate industry if there could be a common rate of 6% applicable to all categories of housing.

GST has the potential to boost real estate to higher levels, in turn positively impact GDP and help in job creation. It will also ensure that an initiative like ‘Housing for All by 2022’ becomes a reality. The recent announcement of a possible reduction in GST rates on construction material from 28 to 18% has resulted in a ‘positive sentiment’ reactions from across the industry. Effectively, this reduction – once it becomes applicable – will result in marginal savings in terms of cost, but for real estate as an industry, even this is a welcome move.

The GST applicable on occupation certificate (OC) received homes is zero, while it is levied at 12% for an under construction project.

In effect, it creates a situation where a home seeker feels it is advantageous to wait for the project receiving the OC before making the purchase, as there is a saving of 12% GST. The impact is being acutely felt on under construction stage sales.

As we step into the second year of the GST regime, if the few pending issues are resolved, then the impact of GST on real estate will be far-reaching and positive.

Niranjan Hiranandani, CMD Hiranandani Group, and national president, Naredco