GST may make homes cheaper in Karnataka

The real estate sector will be one of the biggest beneficiaries under the GST regime, he said, in his address to members of trade and commerce, chartered accountants and other professionals. Apartments will be taxed at 12% under the GST regime which Adhia said might be beneficial to home buyers

Flats in Karnataka currently have a works contract component under the State VAT laws that are taxed at 4% on the total value of the contract under the composition scheme, or at 14.5% on the value of the material with input tax credits. There is a separate 15% tax on the services that are availed — like architect or transport — for building the apartment, and the same goes to the government of India.


The finished apartments will come under the 12% tax rate under the GST regime, and according to Adhia, they will effectively become cheaper after factoring in the input tax credit the developers are going to get.

The Revenue Secretary mentioned that quite a few construction materials and appliances that are used in building an apartment will come under 28% tax under the GST regime, while the end product itself are taxed at a lower 12% GST.

The developers are going to claim input tax credit against the GST payable, and may not have any more tax liability as they would have already paid higher rates of tax. This will have a sobering effect on the tax incidence, said Adhia, who is at the forefront of creating the GST framework said.

Source : The Economic Times.

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Santosh Kenchaamba

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