ABSTRACT

The Goods and Services Tax (GST) India is biggest tax reform post
independence was implement on 1 July 2017. The new tax regime ka
transform the Indian economy with its one Nation, One Market, One Tax
principle by subsuming a host of indirect taxes charged at varied rates by the
Centre and states, therefore bringing uniformity in taxation across the
country. Its primary objective is to simplify the complex tax structure on the
supply if goods and services. While this reform may have certain short-term
negative impacts The earlier indirect tax frame work had challenges of
multiplicity and cascading of taxes, apart from other issues/ complexities,
both technical as well as from the perspective of ground-level practices by
way of increased credits. reduced prices, uniformity of pricing actions the
country, free movement of goods, etc. and the real estate sector should be
exception. The key feature of GST is to remove the cascading effect of taxes by
making credits fully fungible. The objective is to ensure that businesses only
act as a pass though for all taxes and that GST
Constriction and real estate has been a booming sector in India, which is
facing a major slowdown in the aftermath of demonetization. It has always
been a sector Riddled with litigation wing to multiplicity of taxes and dust
administration mechanisms, thereby exposing it to the conundrums of both
Central and State levies, Currently, certain activities in this sector command a
cumulative tax levy in effectively 140% of the actual transaction value owing
to cascading effect Farther there are long standing issues which have not been
concluded till date. An amount of USS 1 trillion is expected to be reached by
the Real estate sector in India by 2030. The Real Estate sector will contribute
13 per cent of the country's GDP By 2025. Massive upcoming of nuclear
families. faster urbanization and rising household income will remain the key
drivers for growth and development in all spheres of real estate, including
commercial, residential, and retail. Indian real estate will be increased by 19.5
per cent CAGR from 2017 to 11 2028
The Indian Government is focusing more on affordable housing
programs so as to achieve its target of providing houses to all by 2022. The,
real estate sector is passing through structural reforms with the
implementation of new acts and norms. Until recently, the Indian real estate
sector was experiencing slow sales, rising cods and stagnant prices since the
great recession of 2008-09 following demonetization. The sector has now
been subjected to another wave in the form of GST. While developers are
taking all the necessary precautions and safeguards to prepare themselves,
and on the other hand consumers are waiting for the right time to sign a deal.
Although it has been two years since the implementation of GST. this paper
attempts to shed light on impact of Indirect taxes on real estate in Pre and
Post GST regime. This article aims to study the impact of GST on real estate
sector of India. In addition to that this paper aims at studying the impact of
taxes that were levied earlier and new development of GST on Construction &
Real Estate in the present scenario.

Keywords: GST Real Estate, Construction, Construction Industry, Effects of

GST GST in Construction, Construction cost of GST, Building Construction,
Affordable Housing Tax Base.
 CONTENTS

TITLE PAGE

DECLARATION

CERTIFICATE

ACKNOWLEDGEMENT

ABSTRACT

CONTENTS

CHAPTER 1. INTRODUCTION

1.1 Introduction

1.2 Scope of Study

1.3 Limitations of the Study

1.4 An Overview of the outcomes of the research

1.5 GST Structure

1.6 Componant of GST

1.7 A) A brief introduction of GST

B) A brief introduction of Real Estate Sector

1.8 What are the types of real estate sector

1.9 Examples of Real estate

CHAPTER 2. LITERATURE REVIEW

2.1 Literature Review

CHAPTER 3. OBJECTIVE OF THE STUDY

3.1 Problem Statement

3.2 Objective of the Study

CHAPTER 4. RESEARCH METHODOLOGY

4.1 Methodology

4.2 Research Design

a) Decreptive Research

4.3 Comparision of applicable taxes before and after GST

4.4 What will be the effective prices after the implementation of GST

CHAPTER 5. RESULT AND SUGGESTIONS

5.1 Result

5.2 Suggestions

CHAPTER 6. CONCLUSIONS AND RECOMMONDATION

6.1 Overall conclusion

6.2 Recommendation

REFERENCES

APPENDICES

PUBLICATIONS
 CHAPTER-I

INTRODUCTION

1.1 GENERAL

The new tax namely -Goods and Services Tax (GST)

Has come into effect on 1 July 2017 and has become a game changer for all
sectors of the Indian economy. This has brought a dramatic change in India's
tax system since independence and has changed the face-lift of the indirect tax
system. The main purpose of using the GST is to simplify the complex tax
structure in the supply of goods and services. Initially, the changes had some
problems affecting some of the short-term negative effects. The previous
indirect tax framework had the challenges of duplication and tax evasion, with
the exception of other issues/ difficulties, both technical and the perception of
low-income practices by increasing debt, reduced prices, global inflation, free
movement of goods, etc.

A key feature of GST is to eliminate the effect of tax cascading by making the
credits more visible. The aim is to ensure that businesses operate as tax
exempt. In addition, it aims to avoid tax evasion and to eliminate the disputed
tax system between the institution and the national Government. The GST has
simplified the tax calculation process and raised the tax base for indirect tax
collection. As a result of using GST, almost all sectors of the economy are
directly or indirectly affected. Until recently, the Indian real estate industry
was experiencing slower sales, higher costs and stagnant prices since the
Great Recession of 2008-09 following demonetization activity. The sector is
now geared towards new GST. While developers are taking all necessary
safety and preparation measures, on the other hand, consumers are waiting
for the right time to sign the agreement. Although two years have passed since
the establishment of the GST, this paper seeks to shed some light on the
impact of indirect property taxes on the Pre and Post GST government.
SCOPE OF THE STUDY

 A study on the marketing practices of the Construction & Real Estate

business in India.
 Customer satisfaction with regard to the Real Estate and construction
business in India.

LIMITATIONS OF THE STUDY

The present study like any other research studies cannot to be perfect one in
all aspects. Although, possible effort was made to conduct the study as
rigorously as possible, the study is not free from the following limitations:

i. The data required for the study has been collected from number of
sources; hence, there may be overlap or duplication in the secondary
data. Further, there may be certain amount of discrepancy relating to
the secondary data.
ii. The accuracy of the data depends upon the availability of the data
collected from the secondary source.
iii. GST is new launched tax system so the peoples face some
complications.
iv. It is very difficult to check the accuracy of the information provided.
v. Since all the products and services are not widely used by all the
customers, it is difficult to draw realistic conclusions based on the
survey.
 AN OVERVIEW OF THE OUTCOMES OF THE RESEARCH

This study is focused on impact of GST on Real estate and Construction

sector in India. Real-estate market acts as an engine of economic growth for a
country through its contribution to GDP. employment, overall aggregate
demand and other macro economic variables. Similarly, purchase of property
constitutes a major portion of the overall expenditure plans of buyers. The
importance of a study stems from the fact that Real estate sector is among the
highest revenue earning sectors of India and is expected to touch a growth
rate of 30% over the next decade. The Real Estate and construction Industry
have significant links (both direct and indirect) with almost 300 sectors such
as cement, steel, paint, and hardware which not only contribute to Capital
formation and job creation and income generation, but also encourage and
stimulate economic growth.

GST STRUCTURE

A dual GST is proposed where both centre and state government of administer
of GST
 COMPONANT OF GST

There are 4 tax Acts applicable under this system:

1. LCGST
2. SGST
3. UGST
4. IGST
CGST: Collected by the Central Government on an intra-state sale (Eg:
transaction happening within Maharashtra)
SGST: Collected by the State Government on an intra-state sale (Eg:
transaction happening within Maharashtra)

UGST: Collected by the Union territories on an intra-territorial sale (Eg:

transaction happening within Andaman & Nicober Islands) IGST: Collected by
the Central Government for inter-state sale (Eg: Maharashtra to Tamil Nadu)

1.1 (A) Brief introduction of GST:

The replacement of old can regime with GST is not a one day legislation. A lot
of discussion and debate has gone into the structuring of the GST. It took over
two decade to convert the dream of one Nation One tax into reality. Finally the
Constitutional Amendment Act, 2016 pave the way for GST. This amendment
has inserted three new article in the Constitution of India and make changes
in half a dozen of existing provisions. The new article includes:

1. Art. 246A2 which gives the authority to State and Union government to
make law with respect to GST simultaneously.

2. Art. 269A3 talks about the inter-state transaction. It states that in case of
inter-state trade, the tax will be levied and collected by the Government of
India and shared between the Union and the state.

3. Art. 279A4 under this article the GST Council was established which is
chaired by Finance Minister. This council decides on the slab rates and
decision is taken by majority. 2/3rd of the voting rights are with Union and
1/3rd are with States.
1.2 (B) A Brief Introduction of Real Estate Sector :

What is Real-estate sector?

Real estate sector is though not specifically defined under GST Act, 2017
but in general it means "property consisting of land and the buildings on it,
along with its natural resources such as crops, minerals or water; immovable
property of this nature; an interest vested in this (also) an item of real
property. (more generally) buildings or housing in general. Also: the business
of real estate; the profession of buying, selling, or renting land, buildings, or
housing.
Real Estate is a business and therefore not a profession. Real estate is
frequently alluded to as work, however in all actuality, it is business.
Demonstrable skill applies to science, workmanship or figuring out how to be
valuable to other people, to profit by the work or individual who uses it as
much as possible; and the business is primarily for profit, and the profit
belongs to the person who runs the business. Expertise means gaining access
to specialized knowledge.
Real estate is the property that contains land and development,
including buildings, structures, roads, Structures and utility plans. Property
rights give the title to land ownership. development, and natural resources
such as minerals, plants, animals, water, etc.

a) What are the types of Real-estate?

There are four type of real estate:

1. Residential real estate includes both new construction and resale homes.
The most common category is single-family homes. There are also
condominiums, co-ops, townhouses, duplexes, triple-deckers, quadplexes,
high-value homes, multigenerational andvacation homes.

2. Commercial real estate includes shopping centers and strip malls, medical
and educational buildings, hotels and offices. Apartment buildings are often
considered commercial, even though they are used for residences. That's
because they are owned to produce income.
3. Industrial real estate includes manufacturing buildings and property, as
well as warehouses. The buildings can be used for research, production,
storage, and distribution of goods. Some buildings that distribute goods are
considered commercial real estate. The classification is important because the
zoning, construction, and sales are handled differently.

4. Land includes vacant land, working farms, and ranches. The subcategories
within vacant land include undeveloped, early development or reuse,
subdivision and site assembly

Figure: 1.1: Types of Real Estates

1.3 EXAMPLES OF REAL ESTATE

Now that the four main categories have been described, it is appropriate to
mention some examples. of different types of real assets.

i. Single-family accommodation - Any home designed for single-

family only
ii. Multiple family accommodation - Any home group designed for
more than one family
iii. Attachments - Any unit connected to another (not free)
iv. Flats/ Apartments - Each unit in a building with many units. The
boundaries of the apartment are usually defined by the boundary of
the locked / locked doors. It is most often seen in houses with many
rooms.
v. Multi-family house - It is often seen in separate multi-storey
buildings, where each apartment is a separate apartment or unit.
vi. Condominium (Condo) - A building with individual units owned by
individuals.
vii. Adjacent House - A free building that does not connect to anything
else (the-home with a theory
viii. Portable House - Houses that can be moved on a flatbed truck ix.
Caravan - A car with wheels that has a permanent seat attached to it
ix. Villa - A building with only one room and usually with a flat roof
x. Hut - A dwelling made of materials such as bamboo, mud and clay
 CHAPTER 2

REVIEW OF LITERATURE:

GST was first introduced by France in 1954 and now it is followed by

140 countries. Most of the countries followed unified GST while some
countries like Brazil, Canada follow a dual GST system where tax imposed by
central and state both. In India also dual system of GST is proposed including
CGST and SGST.

Govinda Rao (2009) "Goods and Service Tax - Some progress towards
clarity" the author in his article express his views on the first empowered
committee report of state finance ministers of Goods and Service tax to be
implemented in India. He also explains salient features, shortcomings of the
proposed GST. He suggests that the proposed GST model should overcome the
shortcomings of VAT system. He alsothrowlight on the challenges faced in the
implementation of GST in India.

Ehtisham Ahmed and Satya Poddar (2009) studied "Goods and Service Tax
Reforms and Intergovernmental Consideration in India" and found that GST
introduction will provide simple and transparent tax system with increase in
output and productivity of economy in India. But the benefits of GST are
critically dependent on rational designof GST.

Ehtisham Ahmed and SatyaPoddar (2009) studied Goods and service tax
reforms and intergovernmental consideration in India and found that GST
introduction will provide implies and transparent tax system with increase in
output and productivity of economy in India. But the benefits of GST are
critically dependent on rational designof GST.

Dr. R. Vasanthagopal (2011). Conducted a study on, GST in India: A big leap
in the Indirect Taxation System and concluded that switching to seamless GST
from current complicated indirect tax system in India will be positive step
inbecoming Indian economy. Success of GST will lead to its acceptance by
more than 130 countries in world and a new preferred form of Indirect Tax
System in Asia also.
Dr. R. Vasanthagopal (2011) studied "GST in India: A Big Leap in the Indirect
Taxation System" and concluded that switching to seamless GST from current
complicated indirect tax system in India will be a positive step in booming
Indian economy. Success of GST will lead to its acceptance by more than 130
countries in world and a new preferred form of indirect tax system in Asia
also.

Dr. R. Vasanthagopal, (2011)"GST in India: A Big Leap in the Indirect

Taxation System", found that the positive impacts are dependent on a neutral
and rational design of the GST. Balancing the conflicting interests of various
stakeholders, complete political commitment for a fundamental tax reform
with a constitutional amendment, the method of valuation for levying the tax
is to be required.

Nishitha Guptha (2014) in her study stated that implementation of GST in

the Indian framework will lead to commercial benefits which were untouched
by the VAT system and would essentially lead to economic development.

Panda and Ratel (2015) analyzed the impact of GST (Goods and Services
Tax) on Indian Tax Scenario. They have detailed brief description of the
historical Indian taxation system and its tax structure. Then the need arose for
the change in tax structure from earlier tenure been discussed in detail in this
paper by the authors as the background, silent features and the impact of GST
in the present tax scenario in India.

According to Kumar, C. R. (2015) in his paper on. "GST in Indian Economy:

It's Benefits and Impact" explore about basic concept of GST and it impact.
GST benefit to business person as well as consumer inter of reduction of tax
rate and compliance burden.

As per Dani, S. (2016) in his paper on, research paper on an impact of goods
and service tax (GST) on Indian economy. Explain about GST concept in Indian
economy. Paper limited to descriptive study. Data taken from published
sources.

According to Kumar, V. (2016) in his paper on. "GST-A boon or a bane for
India" explain about recommended GST model and its benefit. Study
published prior to GST era which explore about concept of GST in Indian
economy. Paper made analysis between pre GST model i.c. VAT and new GST
model.

Dani S (2016) A Research Paper on an Impact of Goods and Service Tax (GST)
on Indian E stated that GST would impact negatively on the real estate market.
It would add up to 8percentage to the cost of new homes and reduce demand
by about 12 percentage.

Poonam (2017) in her study cleared that in the system of indirect taxation
GST plays a very important role. The cascading and double taxation effects can
be reduced by combing central and state taxes. Consumer's tax burden will
approximately reduce to 25% to 30% when GST is introduced and then after
Indian manufactured products would become more and more inexpensive in
the domestic and international markets. This type of taxation system would
directly encourage economic growth. GST with its transparent features will
prove easier to administer. With the above reviews we can assume that GST is
a tax reform which will change the scenario of the country as a support for
this review study.
OBJECTIVES OF STUDY:

1) To study the various indirect taxes on real estate in pre and post GST
regime.

2) To understand the present amendments in GST in with reference to real

estate sector.

3) To find the impact of GST on various stakeholders on real estate sector.

4) To study the Pros and Cons of GST on Real Estate.

Statement of The Problem

Indirect Tax system is a very lenghty process in tax system. GST help to
reduce the indirect taxes in public no one awareness about GST and how GST
effect the life of comman person.
After GST what is benefits to various sectores and change in various
prices.

Hypothesis

Based on research problems the following hypothesis has been framed,

The consumers are not satisfied with the implementation of GST with
regarding to real estate sectore and this is mainly because of the lac of
awareness of the various aspects of GST among the consumers.

There are responces of 50 people were taken for this and consumers age
above 20 who are having access to internate. The metod of sampling use is
simple random sampling and the data was collected through google form
 CHAPTER 3

RESEARCH METHODOLOGY:

3.1 METHODOLOGY

Research is a logical and systematic search for new and useful

information on a particular topic. Research methodology is a systematic way
to solve a problem. It is a science of studying how research is to be carried out.
Essentially, the procedures by which researchers go about their work of
describing, explaining and predicting phenomenon are called research
methodology.

3.2 RESEARCH DESIGN

A good research design has characteristics viz. problem definition, time

required for research project and estimate of expenses to be incurred the
function of research design is to ensure that the required data are collected
and they are collected accurately and economically. A research design is
purely and simply the framework for a study that guide the collection and
analysis data. In this project the two basic types of research design aroused

- Descriptive Research:

It is the design that one simply describe something such as demographic

characteristics of people The descriptive study typically concerned with
determining frequency with which something occurs or how two variables
vary together what, when and why apex of the research. It requires
formulation of more specific hypothesis and the testing these through
statically inference technique. This is the research design of the study and
then it comes to develop the research plan, which means that what to do
before going for the actual interpretation and it is discussed below
1. TO STUDY THE VARIOUS INDIRECT TAXES ON REAL ESTATE IN THE
PRE AND POST GST REGIME:

For the purpose of studying the various old and new informal taxes, the data
collected in the

GST compliance manuals where the Goods and Service Tax (GST) is levied on
the supply of goods

and services.

The Indian Goods and Services Tax Act is a comprehensive, categorized tax
that is taxable on all value additions. According to the set, the tax rates
applicable during the VAT regime and now under the GST regime are given in
the following table.

Nature of Duty Tax Rate(Percentage) Time of Payment of Tax

VAT 1.00--4.00
On Sale of Under
Service Tax 4.50
Construction Properties
Registration Charges 0.50- 1.00
Stamp Duty charges 5.00- 7.00
Source: IJRE, March 2019

VAT, Registration Charges, Stamp Duty Charges vary from state to state. VAT
was not applicable on completed or ready to sale properties. Under the
erstwhile indirect tax regime, Cenvat Credit on inputs used for the
construction of a building or a civil structure or any part thereof was
restricted too.

1. Service Tax - If you are purchasing an under-construction property,

developer will have to charge you service tax and deposit it with central
government. This tax was not applicable till 1st July 2010. The key
reason for the same was contract between builder and buyer for
construction of residential unit was disputed as works contract as it also
includes value of land. Hence rules regarding taxes on work contract
were not applicable on residential complex construction. In finance act
2010, government added an explanation to definition of construction of
residential complex and made it deemed service. For the simplicity sake.
 government has given abatement of 3/4th of cost of unit as land and
goods for construction
and only 1/4th of the cost of unit is treated as service. Hence presently
most homebuyers are paying 3.75% of cost of unit as service tax (1/4th
of 15% ). Recently service tax on under construction property has again
been put under question as Delhi High Court ruled against this and
matter is sub-judice at Supreme Court of India.
2. VAT (Value Added Tax) - If you are purchasing an under-construction
property, you will have to pay additional VAT in some states such as
Karnataka, Haryana and Maharashtra. Developers charge this value
added tax and deposit it with state government. VAT has also been
under dispute for long time and still there are many states such as UP
who do not charge VAT. Also unlike service tax there is no uniform way
of computing VAT across states. E.g. in Maharashtra under composition
scheme VAT is charged as 1% of agreement value whereas in Haryana
the same proposal was passed but not yet agreed by developers. In
Karnataka VAT is charged at 5% of agreement value of unit. To calculate
accurate value of VAT and not use composition scheme, developers will
have to maintain proper accounts of goods purchased for construction
and VAT paid by them for the same to get input credits which is
cumbersome and makes it tough for buyers to understand.
3. Stamp Duty - Stamp duty is charged by state government, again at
varying rates, for registration of sale agreement for real estate
transactions. Incidentally if you are buying a ready to move-in property
directly from developer after he has obtained completion certificate
from authority, you don't need to pay service tax and VAT hence saving
3.75% to 9% of property cost depending on state where you are buying
property.
 Table 3.2: Real Estate Transactions - Taxability of under GST (Prior to
1st April, 2019)

Particulars Applicability Rate of Tax Input Tax

(Percentage) Credit

On under construction Applicable as supply of 8.00 Available

Properties For Homes services as per
Purchased under credit Schedule I of CGST Act
linked subsidy scheme. 2017
Applicable as supply of 12.00 Available
services as per
Schedule I of CGST Act
2017
On resale properties NA - NA

On Land purchase and NA. As per Schedule III - NA

sale sale of land is neither
supply of goods nor
services
Works contract Applicable. 18.00 Available

Composite supply Of Applicable. 18.00 Available

works

Composite supply Of Applicable. 12.00 Available

works

Source : GST Manuals

How to Calculate GST on Under Construction Flat 2019 ?

You have almost skimmed every possible and necessary information on
the latest updates on real estate current GST rates. Therefore now you can
somehow scrutinize well and will be able to figure out how to calculate the
GST on a flat purchase. Let us make it easier for you to know the GST rate on
under construction property by breaking the calculation process into steps.
Scroll down.
1. The ones who are about to purchase residential flats for them, the
government has offered relief. You are subjected to pay 18% of GST on the
under construction property.

2. Out of this 18%, deduct 1/3 and rest is the payable GST rate i.c., 12%. The
deduction made is of land value which is tax-free inGST.

3. Now the 33rd GST amendment comes into the picture. It slashed the 12%
GST to 5% on the under construction property and ready to move in flats with
no CC issuance

4. This 5% of GST on under construction property will be there only in the

absence of ITC Input Tax Credit).

5. During the calculation of GST for under construction property, the whole
amount is being considered i... the value of building and land too

6. The GST will always be applicable for under construction properties. A

single tax structure is definitely a welcome move and the introduction of
Goods and Services Tax (GST) seeks to do just that by way of amalgamating a
large number of Central and State taxes into a single tax. GST will not only
address the concerns of double taxation but will also help in reducing the
overall tax burden on goods and services. Furthermore, it will also help in
making Indian goods competitive internationally thus providing a much-
needed boost to the economy.

1. Compliance and Efficiency :-Thanks to the abolition of various central, state

and local taxes, GST will permit quicker and easier transfer of goods between
[Link] implementing a uniform tax structure, the entire real estate sector
will stand to benefit thus improving the tax compliance. GST will also
inadvertently replace most indirect taxes, with a single tax, thereby ensuring
an overall efficient taxation system.

2. Double Taxation :-The Real estate sector was plagued with several issues
regarding multiple taxation which amounted to over 25 percent in indirect
taxes. GST will break the shackles of double taxation by freeing home buyers
and investors from the hassle of paying several state taxes at different levels.
3. Stamp Duty and Registration :-The remaining hurdle is that Stamp duty is
not to be . subsumed under GST and hence will continue as it is today. There is
no provision for input tax set off available for the stamp duty paid for the land
which basically goes against the entire premise of GST. Moreover, there would
be no change in registration charges as well on real estate sale transactions.
The silver lining as such is that GST will subsume the service tax and value
added tax (VAT) charges which were payable on sale of under-construction
properties.
2) TO UNDERSTAND THE PRESENT AMMENDMENTS IN GST IN WITH
REFERENCE TO REAL ESTATE SECTOR

As envisaged from one of the objectives, the latest changes/ amendments to

Real Estate are now being discussed in this way. In February 2019, new GST
prices were introduced into residential buildings and became operational in
April 2019.

Recent amendments of Rules of GST to benefit the builders:

Table 2.1: Recent amendments of Rules of GST to benefit the builders

Particulars Before 01-04-2019 On or After 01/04/2019

Residential Residential Residential Residential
Buyers Buyers Buyers (Other Buyers
(Other than (Affordable than Affordable (Affordable
Affordable Housing Housing Housing
Housing Scheme) Scheme) Scheme)
Scheme)

Effective rate of 12% 8% 5% 1%

GST Whether
ITC is available?

Whether ITC Yes Yes No No

available

Cost of Land (A) 25 25 25 25

Cost of 14.4 14.4 14.4 14.4

Construction (B)

GST on Inputs 2.6 2.6 2.6 2.6

(at the rate of
18%(C)

ITC Available(D) -2.6 -2.6 Nil Nil

Total cost to the 39.4 39.4 42 42
Builder(E)
Profit Margin (F) 0.79 0.79 0.84 0.84

Sale Price of Flat 40.19 40.19 42.83 42.83

(G-E-F)
GST on Sale 4.82 3.22 2.14 0.43
Price of Flat (H-
G Effective Rate)
NET Cost to the 45.01 43.41 44.97 43.27
Buyer(G+H)

Source: GST Rules/amendments

The GST Council abolished the ITC benefits and provided a
transformation plan for developers.
The current most common GST rates in the real estate sector are
provided above:
i. GST for non-construction properties - 5% without ITC benefits
ii. GST for affordable housing (within Rs. 45 lakh) - 1% excluding ITC
benefits
iii. GST in real estate - 12% with ITC profits
Recent Amendments to Builders' Rules and Procedures for Reduced
Price Benefits are presented in the following table showing descriptive
statistics. Based on the descriptive statistics shown in the table, the
following could be evidenced:
i As a result of recent amendments from 1 April 2019, buyers of
affordable housing (Affordable Housing Scheme) gained nominal (Rs
43.41-43.27) which is Rs 0.14 at about 0.32 per cent compared to the
critical limit of 5.00 percent.

ii. As a result of the latest amendments effective from 1 April 2019,

buyers of accommodation (Excluding Affordable Housing Scheme)
gained a nominal amount of (Rs 45.01-44.97) which is Rs 0.04 which is
approximately 0.09 percent compared to the critical limit of 5.00%.

As a result of recent amendments with effect from 1 April 2019, the

Builders (AffordableHousing Scheme) gained marginally (Rs 42-39.40)
i.c.. Rs 2.6 which amounts to approximately about 6 percent against the
significant limit of 5.00 %.

iv. As a result of recent amendments from 1 April 2019, buyers of

accommodation (Excluding Affordable Housing Scheme) have
gained marginally (Rs 42-39.40) which is Rs 2.6 which is
estimated at 6 percent compared to the significant limit of 5.00 %.
Given below are the details of the original GST rates and the prevailing
rate of GST on eligible properties.
CHIC has Notified Rules & Procedures for builders intended to take
benefits of reduced rates (1 to 5% on sale of under construction flats
commencing on or after 1st April, 2019

GST Rate
GST Rate
(in effect Input Tax Input
(from 1st
Type of Real Estate till 31st Credit Tax
April
Property March Credit
2019
2019)
onwards)

Residential Property Not

8% 1%
(affordable housing Available available
segment)
Residential Property
(non- Not
12% 5%
affordable housing Available available
segment)

Commercial Properties 12% 12% Available

Available

2.2 AFFORDABLE HOUSING SCHEME:

On February 7, 2019, the government asked builders not to
charge any GST to homebuyers because the effective rate of GST on
almost all affordable housing projects is 8%, which can be adjusted for
the credit of inputs. At its last meeting on January 18, 2019, the GST
Council extended the 12percent GST concessional rate for building
houses under the Credit-Linked Subsidy Scheme (CLSS) to promote
affordable housing, which received infrastructure status in the 2018-
2019 Budgets. The effective rate of GST. however, drops to eight
percent. after deducting one-third of the amount charged for the house /
apartment, from the cost of the land. This provision entered into force
on January 25, 2019.
2.3 LUXURY HOUSING SEGMENT:
In the case of luxury properties, the cost of base construction may
drop a bit, but since the input tax credit is limited to only 12%, it will
not be able to reduce the tax liability on the part of the property lower
because taxes are paid on other expenses as well. A different point of
view is that the prices will increase by 5 to 7 percentages depending on
the type of project. Indeed, while mass consumer goods would be taxed
at the rate of 5%, many luxury items would be taxed at 28%.

COMPARISON OF APPLICABLE TAXES BEFORE AND AFTER GST:

Goods and Services Tax (GST) is an indirect tax applicable
throughout India which replaced multiple cascading taxes levied by the
central and state governments. It was introduced as The Constitution
(One Hundred and First Amendment) Act 2017.

Construction Previous Taxes Taxes under Impact

Materials GST
Cement 31% 28% Cheaper
TMT Bars 18% 18% Neutral
Flyash Bricks 5% 12% Costlier
Tiles 26% 28% Costlier
Paint 28% 28% Neutral
Sanitaryware 28% 28% Neutral
Plywood 28% 28% Neutral
Electrical Goods 12% 28% Costlier

GST Rates on Construction Materials

The GST applied on construction of a property is in case of the
construction materials used and the construction services. These
charges are part of the ultimate price of the property. The applicable
rates of GST are varied on the materials used and at the different stage
of construction. The GST rate is made up of the CGST and the SGST.
Given below is a general idea of the GST levied on construction
materials used.
GST on essential construction material Key rates
Building bricks 5%
Crude Granite/ Marble Rubble 5%
Fly Ash Blocks 5%
Roofing Tiles 5%
Natural Sand (For Construction) 5%
Marble/Granite Blocks 12%
Refractory bricks/tiles 18%
Glass for construction purposes 18%
Prefabricated structural components for building 18%
Marble/Granite (other than blocks) 18%
Portland/slag cement 28%

3) TO FIND THE IMPACT OF GST ON VARIOUS STAKE HODERS ON

REAL ESTATE SECTOR

1. Impact of GST on Buyers

Under the earlier tax regime, buyers had to pay VAT, Service tax.
Registration charges & Stamp duty on purchase of properties under
construction. Also since VAT, Registration charges & Stamp duty were
state levies, prices of properties varied from state to state. Moreover,
developers had to pay various duties like sales tax (CST), custom duty,
OCTROI etc. for which credit was not available. Under GST, a single tax
rate of 12% is applicable on properties under construction while GST is
not applicable on completed or ready to sale properties which was the
case in previous law. Hence buyers will benefit from reduction of prices
under GST.
2. Impact of GST on Developers / Builders/Contractors
Under the previous tax regime, developers had to bear Excise
duty, VAT. Customs duty, Entry taxes etc. on raw materials/ inputs and
Service tax on various input services like approval charges. architect
professional fees, labor charges, legal charges etc. I'TC was not available
for duties like CST, Customs duty, Entry Tax etc. This would impact the
pricing and subsequently the burden was transferred to the buyer.
Under GST, developers' construction costs are significantly reduced as
multiple taxes are subsumed and due to the availability of input tax
credit. Also, reduction in cost of logistics will be an added benefit. Hence
developers may see improvement in margins. On the downside,
developers have to do multiple calculations to arrive at ITC in order to
pass it on to the buyers. Hence, in most cases, they can pass on the ITC
only during the final stages. This lack of transparency on ITC, may affect
the developers since buyers may resort to wait and watch approach and
defer buying decision.

3 Impact of GST on other Stakeholders

The impact on the allied services like labor, material suppliers,
service suppliers etc. depends on the increase or decrease in the tax
levied on these goods and services. This will have a consequential
impact on real estate industry as a whole

4) TO STUDY THE PROS AND CONS OF GST ON REAL ESTATE

A) PROS OF GST ON REAL ESTATE
1) Increase in Foreign Investment- With GST, India is now a unified
market and the foreign investment has increased in India. The goods
that are manufactured within India because of their reduced costs have
become more competitive in international market leading to growth in
export. The implementation of Goods & Services tax puts India in the
line of international tax standards, making it easier for Indian
businesses to sell in the global market.
2) Transparency-The tax administration has started working
corruption free. Also enabling sales invoices to show the tax applied has
resulted in transparency.

Advantages of GST
GST Removed the cascading effects from the supply of goods and
services removing the cascading effect not only affected the cost of the
good but also removed the taxes that led to a reduction in the cost of the
goods
GST will end cascading effects :- This will be the major contribution of
GST for the business and commerce. At present, there are different state
level and centre level indirect tax levies that are compulsory one after
another on the supply chain till the time of its final consumption.

Growth of Revenue in States and Union :- It is expected that the

introduction of GST will increase the tax base but lowers down the tax
rates and also removes the multiple point taxation. This will lead to
higher amount of revenue to both the states and the union.

Reduces transaction costs and unnecessary wastages :- If

government works in an efficient mode, it may be also possible that a
single registration and a single compliance will suffice for both SGST
and CGST provided government produces effective IT infrastructure and
integration of states level with the union.

Eliminates the multiplicity of taxation - One of the great advantages

that a taxpayer can expect from GST is elimination of multiplicity of
taxation. The reduction in the number of taxation applicable in a chain
of transaction will help to reduce the paper work and clean up the
current mess that is brought by existing indirect taxation laws.

One Point Single Tax: Another feature that GST will hold is it will be
'one point single taxation. This also gives a lot of comforts and
confidence to business community that they would focus on business
rather than worrying about their taxation that may crop at later stages.
This will help the business community to decide their supply chain,
pricing modalities and in the long run helps the consumers being goods
competitive as price will no longer be the function of tax components
but function of sheer business intelligence and innovation.

Reduces average tax burdens :- Under GST mechanism, the cost of tax
that consumers have to bear will be certain and it is expected that GST
would reduce the average tax burdens on the consumers.
Reduces the corruption: It is one of the major problems that India is
overwhelmed with. We cannot expect anything substantial unless there
exists a political will to root it out. This will be a step towards
corruption free Indian Revenue Services.

Present CST will be removed and need not to be paid. At present there is
no input tax credit available for CST.

There are many indirect taxes in state and central level currently, which
will be included by GST. i.c. you need to pay a single GST instead of all of
them.

Uniformity of tax rates across the states

Ensure better compliance due to aggregate tax rate reduces.

By reducing the tax burden the competitiveness of Indian products in

international market is expected to increase and there by development
of the nation. Prices of goods are expected to reduce in the long run as
the benefits of less tax burden would be passed on to the consumer.

B) CONS OF GST ON REAL ESTATE

1. Real Estate Market affected - Economists are of the opinion that

GST in India has already had a negative impact on the real estate
market. It has added up to 8 percent to the cost of new homes and
reduced demand by about 12 percent.
2. GST may affect negatively on the real estate market
3. As GST brought small traders in the tax net so i will tricky to small
traders to battal with strong traders.
What Will Be The Effective Prices After GST Implementation?
Short Term Impact: There will be a increase in the prices of the
construction materials (except for cement) because of the increase in
the tax rates. In GST regime, smaller unorganized manufacturers and
dealers (Usually revenue less than 75 lacks) has the advantage of
certain tax exemption/evasion. However these exemptions will
discontinue and all companies will have to levy uniform taxes on similar
products post GST implementation. In order to ensure that the buyer is
able to get the GST credit of purchased goods, the sellers will have to
pay the GST collected every month. This might strain their existing
working capital cycles and result in higher costs for them. So there will
be an increase in working capital requirement for companies in the
short run. But in the long run will be beneficial in light of the expected
reduction in logistics and lower tax on inputs under GST. Thus the initial
impact of GST would be a slight increase in the cost of construction
materials.

Long Term Impact: There will be a slight decrease in the cost of

construction materials over the long run. But there will be no major
impact on the Total Construction cost in Long run because of GST
implementation. Although input tax credits help in decreasing the prices
of various Construction Materials, an increase of tax for composite
contracts to 12% and increase in the taxes on materials like plywood
and electrical will normalize the total impact on Construction Costs.
 CHAPTER 4
RESEARCH GAP
Quetionarries survey
The study focuses on extensively study of secondary data
collected from government websites, various national and international
journals and articles, publications, conferance papers, government
reports, newspapers, magzines which focused on various aspects of tax
structures and GST on real estate
The Quetionarries are all classified in to two sections, Section A
and Section B which is in section A Contractor and respondant profile
and in section B customer and respndant quetionarries. The
quetionarries was design as a optional categories, the factors where
adopted to measure impacts of demonatization and GST on construction
industry.
Section A:- Besed on Contractor questionrries
1. Will property prises go up, with the GST being applicable on all
construction related materials and services?
a. Yes
b. No
2. Is it true that under construction properties will be costlier
compaired to ready to move in properties?
a. Yes
b. No
3. Will Resale Properties become costlier under GST?
a. Yes
b. No
4. Can a contractor get input credit for GST paid while purchasing an
office?
a. Yes
b. No
5. What will be the overall increase or decrease in property prices, once
the GST is implemented?
a. Increase
b. Decrease
Section B:- Besed on Customer questionrries
1. Will the EMIS on home loan shoot up, due to the GST?
a. Yes
b. No 2. Will borrowers need to shel out tax on the the entire home loan
amount, even incase where only part of the EMIS are due?
a. Yes
b. No
3. Will resale properties become costlier under the GST?
a. Yes
b. No
4. Will the GST impact the stam duty on buying a propoerty?
a. Yes b. No
5. Are you facing issues in claiming refund under the GST regime?
a. Yes
b. No
6. The agreement between the developer and land owner liable for
GST
a. Yes
b. No
[Link] is a very ggod tax reform for India
a. Agree
b. Disagree
c. Neutral
8. GST has increase the various lagal formalities
a. Agree
b. Disagree
c. Neutral
9. GST has increased the Tax Burelen on comman man.
a. Agree
b. Disagree
c. Neutral
10. India is really ready for GST implementation
 RESULT
 Quantum of materials, machinery & man power required during
the construction phase of the project
 Basic rates of laborers, materials & machinery pertaining to the
project under consideration. Percentage of taxes & their breakup
before & application of GST.
 Arriving to the cost of laborers, materials & machinery of the
project by application of taxation rates before & after GST.
 Project Scheduling, check for the areas of time & cost overrun.
 SUGGESTIONS
 Analyzing the taxes & their breakup before GST needs an
interdisciplinary approach.
 Arriving at a rate of an item of work is a topic of discussion as
there are different views of different agencies working on a
project regarding the cost of an item of work.
 Going for a Labor+ Material Contract i.e. an Item Rate contract &
maintaining the same quality & cost of construction is something
the builders & contractors need to work on.
 Change in the entire material procurement system & also in the
mode of billing for various item of work
 Drastic change in the cash flow matrix of the project under
consideration due to the required checks to be met with under
GST
 CONCLUSION
Indian GDP depends upon many sectors in which real estate
sector play vital role. This sector contributes about nearly 7.3% of
India's GDP. In addition it provides service to people, generation of
employment, professional service providers and so many activities
carried out under this sectors. Under new GST regime, special
consideration made out including reduction of tax and availability of
credit. There is positive impact on real estate of GST like rate of tax have
been reduced which directly benefit to the home buyers as well as
consumers. Now there is single point taxation. However, there are many
corner which required In previous to consideration like payment of tax
under reverse charge mechanism where benefit of tax credit not
available. In this situation buyers will have to pay more than normal
scheme. In sum up there have been positive impact of GST on real
estate.
Obviously, GST has led to increase in revenue generation of the
sector which is also the biggest employment generation sector.
Improvement in the quality of work by the contractors as there is a fixed
time duration on cash flow in a project. Builders as well as the other
agencies working in this sector have started a panel working on the
untouched areas of working on the principles of construction
management & risk management of the projects having huge
significance in the construction society. An out of the box approach to
the various technological option of doing the work has emerged to
counter act the cost effect of GST.
 RECOMMENDATIONS
The following are the suggestion made based on the results of the
study.
Some suggestions for better administrative machinery to handle the
implementation of Goods and Services Tax Act in India are:
 Standardization of systems and procedures.
 Tax relief in case of branch transfer
 Well defined procedures in case of Job works
 Uniform dispute settlement machinery.
 Adequate training for both tax payers and taxen forcers.
 Re-organization of administrative machinery for GST
implementation.
 Building information technology backbone - the single most
important initiative for GST implementation.
 Uniform Implementation of GST should be ensured across all
states (unlike the staggered implementation of VAT) as many
issues might arise in case of transactions between states who
comply with GST and states who are not complying with GST.
 CHAPTER 5

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