Effect of GST on Indian Real Estate

Abstract

The real estate sector is one of the most important sectors of our
Indian economy. It is expected that the Indian real estate sector
will reach US$ 1 trillion by the end of 2030. Since it has a very high
multiplier impact on the economy therefore, it has proved to be a
big driver of economic growth as well. After agriculture, this sector
is the second-largest employment generating sector. The real estate
industry in India has been growing at about 20% per annum and is
contributing nearly 5-6% to Indian GDP. Besides generating high level
of direct employment, it has also helped in stimulating the demand
in more than 250 ancillary industries such as cement, steel, paint,
brick, building materials, consumer durables and many more. Indirect
taxability of Construction activities has been tough always and
also subject to litigation many a times. Prior to Goods and Services
tax (‘GST’) rules, the real estate developers and the buyers had to
deal with problems arising from manifold erstwhile taxes such as
VAT, Service Tax, Central Excise, Octroi, Entry Tax, Local Body Taxes,
etc. In addition, rates of specific state, deemed sales, different valuation
for VAT and Service tax, and varied schemes for paying taxes
etc. were among the major problems faced by real estate sector.
Before GST was introduced in India, the Central Government levied
excise duty of 12.5% on almost all the items required for real estate
construction. Parallelly, the State Governments charged value-added
tax (‘VAT’) from 12.5% to14.5% on the same products. This study
aims at researching the detailed impact of GST on the Indian Real
Estate Sector.