Under-construction properties to have 12% tax, due to the new GST rates
All the under-construction properties will have a GST (i.e. Goods and Services Tax) rate of 12% w.e.f. July 1s, 2017. This uniform rating system will help to eliminate disorganization of dual tax charges in the form of service tax, VAT (value added taxation) and various other multiple tax brackets. GST will put a conclusion to all the various levies. Thus, it will certainly help to decrease the cost for the buyers.
Under the new tax policy, most of the construction material falls under the 18 and 28 percent slab. For example, steel products come under the 18 percent segment, whereas cement and other prefabricated materials that are building components, fall under the 28 percent slab. Due the use of input tax credit, the overall taxation will be neutralized.
The council also announced the GST taxes for services like building of a complex, civil structure, building or a portion thereof, envisioned for selling to a buyer, solely or partially. The price of a plot will be involved in the sum charged by the service receiver, which will now be charged with complete input tax credit of 12 percent. This means that the construction cost will minimize slightly, overall. But, due to the 12 percent limit on input tax credit, there can’t be much savings which will apply to high-end constructions.
In the past taxation process, the works treaty attracts a service tax of 6 percent which is a cut-rate tax, under the reduction scheme and VAT scheme that varies from 1 to 5 percent, depending from state to state. While reimbursing these taxes, developers don’t receive a reduction of input tax, whereas in GST, they will begin to receive that benefit. This will be included under the GST, the VAT and excise duty that they pay on steel and cement, which will get them even more benefit on taxes.