GST Overview and Repercussions in Realty Sector
One of the important events in the history of taxation in India was the introduction of the Goods and Services Tax (GST) beginning July 1, 2017. This Structure did away with the multiplicity of indirect taxation on goods and services across the Central and the State Governments. Ensuring that GST has been beneficial to a fair amount of sectors, real estate has indeed been a noticeable one.
This particular blog provides a straightforward picture of the GST regime as regards to simple bare land sales and plotted development’s in tax regime. Dream Location Developers will explore the variations of land and plotting and their treatment in GST, the GST rates applicable on such transactions, and how it affects the prospective buyers and investors in the respective asset classes. It is indeed hoped that this information will help the investors in land and plot in the post GST scenario make sound judgments.
Real Estate and GST – Key Elements to Keep in Mind
A pivotal decision taken by Authority for Advance Ruling (AAR) has stated that the sale of a vacant land plot consisting of no amenities is simply ‘supply of title rights’ which can also be termed as ‘transfer of ownership’ and hence does not come under ‘supply of service’ And therefore, it does not form part of GST.
Still, if the land parcel comes with infrastructure provisions like pipelines, roads and cables, then that constitutes a service. Any development of such land that has been made with the aim of selling it (a building, complex, or any such infrastructure) comes under the definition of service supply according to Clause 5(b) of Schedule II of the CGST Act 2017. Therefore, plotted developments with amenities are subject to GST provisions.
Moreover, Schedule III of the CGST Act further elaborates that selling land or property without any building structure is an ‘immovable property’ and such transaction does not fall under the purview of goods or service supply. This implies that if one is simply selling vacant growths of land where no activity has taken place, then only stamp duties would need to be paid – no GST would apply.
Land Development GST implications for developers
For a real estate developer, if they deal only in selling delineated plots, there is no GST whatsoever on the cost of the plot. However, if plotted development includes basic amenities, it incurs GST charged, at the rate of 18 percent, on the developed portion, which includes the costs of laying pipes, cables, driveways etc, adapted. Plot purchases are only liable for stamp duty payment while purchased plotted developments attract a GST liability on a portion of development. This is important to note when making project analysis and budgeting for land and plots by the sellers and buyers of the plots and land.
Dream location developers are Increasing rental income and Resale value
To sum up, plotted developments include 18% GST on its cost due to the value of development whereas plain land does not include any GST. This difference has budgeting and planning implications for buyers and investors. Knowing when and how GST applies when investing in land or bought plots can give an edge to the buyer.
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Dream Location Developers’s Information
Dream Location Developers along the years has focused on developing luxurious settings and long lasting structures for future generations to enjoy.
For more information about Dream Location and to search your dream property, please visit Dream Location on Google Map. Contact us today to know more about the best real estate deals in Delhi and North India; we will connect you to the right property investment.