Authored by Amit Gupta, MD, SAG Infotech

 The effects of GST and RERA on the home-buying process are two significant government policies that have revolutionized the real estate industry in India. GST aims to establish a standardized and neutral taxation system, while RERA addresses issues such as delays and fraudulent practices in the industry to bring about transparency and better management.

The implementation of GST has had transformative effects on property transactions. Previously, developers used to transfer tax costs to homebuyers, leading to potentially fraudulent activities. However, with GST, all applicable taxes have been replaced by a unified tax system, ensuring clarity and eliminating fraud. The introduction of an Input Tax Credit allows for the refund of excess taxes paid and must be passed on to homebuyers.

The current regulations for GST in property transactions depend on factors such as the type of property and its approval under GST/RERA. Affordable housing options attract a GST rate of 1% without ITC, while non-affordable housing has a GST rate of 5% without ITC. There are additional charges based on the construction status, with ready-to-move houses having no additional fees and properties under construction attracting a GST rate of 12% with full ITC.

RERA has had significant implications for property transactions by ensuring transparency and safeguarding the interests of homebuyers. Real estate agents and developers are required to register under RERA, reducing the chances of fraud and delays. Home loans for RERA-approved projects can result in faster approval and lower interest rates. The state RERA’s web portal provides real-time updates on registered projects, enhancing convenience and transparency for property buyers.

Benefits of GST and RERA

Under the GST regime, the tax rate on under-construction projects has been reduced to 12%, resulting in tax equality and improved tax compliance. RERA has established regulations and regulatory authority, enhancing transparency and buyer confidence. The simplified process and reduced logistics costs have benefited both developers and buyers.

For developers, the implementation of GST and RERA has eliminated various taxes and improved the overall situation, although they are subject to a 15% tax on services. For buyers, the introduction of GST and RERA has improved transparency and simplicity in real estate investments.

GST has played a significant role in reducing federal tax barriers, leading to tax neutrality in the real estate sector. Previously, different states had complex tax structures, but GST has standardized taxation across all states, simplifying property registration.

In conclusion, understanding the impacts of GST and RERA empowers individuals to make property purchases with confidence. GST streamlines the taxation system, while RERA ensures transparency and buyer protection, ultimately shaping the home-buying process in India.