The process of buying a home in India is quite complex and comes with a lot of hassles. Buying a home is something that is a life goal for many people and with the introduction of the revolutionary GST it will be easier to become a homeowner.
It is likely that you will need external funding to buy your home. You may avail of a loan but before you apply, it is important to check your home loan eligibility. It depends on your repayment capability, your age, and several other factors.
Let’s understand how taxes affect your home purchase.
When were VAT and ST applicable?
An under construction project comprises of three components. These include the land cost, materials, and the construction expenses. Neither VAT nor ST is applicable on the land price. The cost of materials is liable for VAT and construction cost that primarily includes labor charges and is liable to pay ST.
The entire process of buying a property and determining the taxes is very complicated. Applying for a loan is simple but analyzing the additional costs and taxes is complex. You may take help of a home loancalculator to know your total cost and EMI.
The Goods and Services Tax (GST) is expected to make the entire procedure less complicated and transparent. Here are three benefits of GST.
- Elimination of multiple taxes
Real estate entails multiple taxes, such as stamp duty and registration, VAT, excise, and ST. Because GST eliminates all these indirect taxes, the procedure will become much simpler. Compliance with the regulations will be easier and double taxation will be avoided.This will benefit you as a home buyer and also make it easier to avail of a home loan.
- Simplified procedure
Buyers do not pay any indirect tax for ready-to-move in properties and therefore, GST will not affect resale transactions. If you buy an under construction property, you need to pay ST and VAT. Because VAT is levied by the state, the rate differs from one location to another. Current taxes on property transactions are high and very complicated. Technical documents about taxation and other procedures may leave you feeling lost. With GST, a single rate is applicable making the entire procedure simple and convenient.
- Reduce developers’ costs
GST is expected to reduce construction costs, which in turn will decrease property prices. The actual effective GST rate would be low because of the input tax credit (ITC) available on materials costs. Furthermore, the tax rate has only marginally increased on major materials like steel and cement and will not have any significant impact.
GST is anticipated to revolutionize the real estate industry. It will eliminate over 16 indirect taxes and only one tax will be levied. The unified regime will abolish double taxation, which negatively impacts the industry. GST will bring greater transparency and provide improved control and monitoring of this sector.