GST: Big change in GST slab, will it become cheaper for you to buy a house now? Know the opinion of experts..
The government has taken a big step to simplify the GST system. Now there will be only two tax slabs on most goods and services, 5% and 18%. A special tax of 40% will be levied on luxury and harmful (sin) products. This proposal has been approved in an important meeting of the Group of Ministers (GoM) on Thursday.
In this meeting led by Bihar Deputy CM Samrat Chaudhary, it was decided that the existing four tax slabs (5%, 12%, 18% and 28%) will be reduced to just two. Under this,
5% will be considered as the merit rate, which will include essential goods.
18% will be considered as the standard rate, which will include most of the other goods and services.
Apart from this, there will be a sin tax of 40% on things like tobacco, soft drinks, and fast food. It is believed that this will simplify the tax structure, and compliance will also improve. Now the final decision on this will be taken in the next meeting of the GST Council in September.
Impact on home buyers and developers
Talking about the real estate sector, currently, different GST rates are levied on different construction materials. Such as 28% on cement, 18% on steel, 28% on paint, and 18% on tiles and sanitary ware. Due to these high tax rates, the cost of developers increases, and it directly affects the prices of the houses.
What is the opinion of experts?
According to a report in Financial Express, experts believe that this change can reduce the prices of houses. Oswal Group Chairman Adish Oswal says that by reducing the tax on cement and other materials, the cost of developers will be reduced, and houses can become cheaper. Especially in tier-2 cities like Ludhiana, the interest of buyers can increase.
SS Group MD Ashok Singh Jaunpuria believes that low tax will give margin to developers, but the real benefit will be only when this saving reaches the customers. This will increase the confidence of buyers, and the demand will remain for a long time.
NCR market situation
GST has already brought transparency to the NCR market. In 2019, GST on under-construction houses was reduced from 12% (with ITC) to 5% (without ITC). The effect of this was that buyers' confidence returned and sales increased in areas like Noida, Gurugram, and Ghaziabad. In the first half of 2024 alone, 38,200 houses were sold in NCR, which is 25% more than last year. However, due to the non-availability of input tax credit (ITC), developers face problems, and building affordable houses remains a challenge.
Demand to bring back ITC
TRG Group MD Pawan Sharma says that it is necessary to bring back ITC partially. This will provide affordable homes to home buyers, and developers will also get good margins so that they can build quality houses on a large scale.
Affordable vs Luxury Housing
According to Sandeep Aggarwal of AIL Developers, the new tax structure can reduce the construction cost by 10–20%, which can make the prices of houses affordable in metros and tier-2 cities. However, concerns will remain about luxury housing.
Viren Mehta, founder of Elitepro Infra, says that foreign and expensive materials are used in luxury homes. If a 40% tax is imposed on them, the cost will increase significantly. Demand will remain in high-end markets like NCR and Gurugram, but it will be difficult for developers to handle the cost.
Overall, the proposal of 5% and 18% GST slabs can prove to be a big relief for home buyers. If developers pass on the benefit of tax savings to customers, then buying a house can really become cheaper. At the same time, a 40% tax on luxury homes will remain a challenge for both buyers and developers. Now all eyes are on the September meeting of the GST Council, where the final decision will be taken on this.
Disclaimer: This content has been sourced and edited from NDTV India. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.
