From the July1, 2017, homebuyers will have to pay a uniform rate on any purchase made under GST. It is expected that GST will bring down the property prices and bring transparency in the industry. Buying a house may or may not become cheaper, but living in a housing society is going to cost you a lot more. The multiple impact of GST and RERA on the real estate sector will be noticeable. The real estate sector already has a sluggish demand and the inventory is increasing constantly. Builders are aiming to clear the inventory before launching new projects in major cities. The GST rates for the housing society are higher than the existing rates in the tax regime.
Any housing society with a monthly maintenance charge above Rs. 5,000 will be liable to pay GST at 18%.The current rate is 15.55%, including the service tax, non agriculture tax and Swachh Bharat cess, this means there will be an additional burden of 2.5% post GST. Further, any unregistered dealer purchase made by a cooperative housing society will attract GST on a reverse charge mechanism, which means that the liability to pay the tax will be cast on the receiver instead of the seller. The property tax has not been subsumed in GST, which means that the property owner will continue to pay the property tax on a yearly basis. There is no GST on property tax since there cannot be double taxation under the GST regime.
Apart from the maintenance charges, like in the past, the residents would be required to pay tax on water and power usage. If the housing society carries out renovation work and purchases commodities for the same, it can get a tax deduction on the purchase of the commodities from the amount paid under GST.
Housing societies with an annual corpus exceeding Rs.20 lakh will have to mandatorily seek registration under the GST. Even if its monthly maintenance charges are less than Rs.5,000 per flat, if the membership base is large and the annual collection exceeds Rs.20 lakh, it would be liable to pay GST. The housing society may opt for the composition scheme if its billing is more than Rs. 20 lakh and less than Rs. 75 lakh. The current tax exemption of Rs.5000 per member, per month will not be applicable in the GST era because the billing in totality will be taken into consideration.
There are various factors that require clarity in terms of taxation under the new regime. It can be concluded, that GST will bring in transparency but also make certain goods dearer than under the current regime.