GST has been reduced by government from 12% to 5%. Let’s understand what the GST of real estate was & what impact this reduced rate of GST has on people.
Ladies and gentlemen boys and girls welcome back to finance to your friend and finance guru vishal tucker is back again with interesting and amazing update we have heard that government has reduced gst on real estate from 12% to 5% whoa whooping 7% reduction in gst so does it mean is it the right time to go and buy a house when let’s analyze so let’s first understand
What really was gst on real estate till date we understood that a builder would give you a flag at let’s say 100 on which he would charge you 20% gst of course he is going to deduct the rebate for land construction and other things and who charge you the gst on the value addition done by him as against that he was able to claim input tax credit for all the raw
Materials purchased in the construction phase that means when a builder purchased cement steel plumbing equipments flooring etc whatever gst he would pay to the vendor of a supplier of all these materials he would claim that as credit so effectively he would pay gst on the value addition done by him however in the recent amendment brought out by the government
Where government has reduced gst from 12% to 5% appears to be more like a move to protect revenue rather than giving benefit to the end consumer now you may feel that how is it possible because the rate has actually gone down by 7% let me explain the builder now when he charges 5% gst to the house buyer will not be able to get any credit of the cement steel and
Other equipments purchased by him so effectively whatever he collects from the home buyer as gst he has to pay to the government so what is going to happen is that this will entail two two things one is all the gst credit which he was getting when he was buying material from registered vendor which was offset to the tune of 18% in steel and 28% in cement now adds up
To his cost that means builder will be forced to increase the base price of his house to adjust the inflated cost second also in affordable home buying or affordable housing the gst rate has gone down from 8 percent to 1 percent but again without the input tax credit being made available to the builder so what is going to happen is that the net effect is that the
End buyer would have very little or no benefit of this reduction because effectively by reducing the rate and correspondingly disallowing the input tax credit builder is left with almost factor a similar situation as he was in earlier one more point which government maybe slipped out all i don’t know how they have factored it is that now will there be no longer
Be forced to purchase his raw materials from a registered vendor simply because an unregistered vendor without invoice may be able to offer materials cheaper to him and hence there is a big danger that the real estate industry would move back to old practices and the transparency which had recently started to come in the sector would again look in the southward
Direction what do you think about this change how has this affected you are you going to buy a house now or have you postponed your decision after looking at this video do let me know in the comment section and yes press the bell icon so that you can watch my videos the moment they are uploaded and if you haven’t subscribed to our channel subscribe now our channel finance to
Transcribed from video
GST on Real Estate | Finance for Non-Finance Professionals By Finance Tube