Past three decades have been phenomenal for the realty market in India. Not only Metro and A Class cities, but B and C class cities and towns also showed a great momentum. In spite of the industry has been cornered with putting further stringent rules and regulations by the government, the growth is phenomenal.
GST, the new buzzword seems to be a reality very soon. The hurdles in the pathway have been removed, and it looks like there will be a common agreement between the states and the center. It is viewed as a major economic reform, and undoubtedly the impact on the property market will be immense.
Is GST a solution to the complex issues of Real Estate Business?
Well, it is quite early to comment on it indeed. The real estate business has so many twists and complexities concerning issues and legalities. Moreover, service tax and VAT are being levied for more than a decade now.
Since each state applies different rules and options while calculating VAT and service tax today, there are constant disputes on the tax rates. Across the regions, developers and builders follow diverse practices. However, the proposed draft of GST would at least resolve the issues related to VAT, Service Tax, and stamp duties. It will be a beginning on the indirect taxation of real estate transactions.
Areas like the tax calculation for services and goods, taxability status in case of joint development agreements and transfer of development rights are still ambiguous. It leads to long-running legal disputes in the courts.
Use of automated CRM systems will be simpler post-GST
Since automation is the buzzword in modern real estate business, every builder and real estate developer wants to implement new-age systems and processes such as CRM. However, because of diversity and disparity in the tax structure put a big challenge in implementing the same.
With the implementation of GST, the majority of the issues will be resolved forever. The tax paid by home buyers and sellers will be uniform across the states. Thus, inter-state transactions will be easy and fast. There will not be configuration related errors in CRM implementations across the states.
As of today, buyers are supposed to pay VAT and service tax at the time of booking before the completion. Also, there are several tax costs that are non-creditable; CST, Entry Tax, Excise Duty, Customs Duty, etc. These are supposed to be paid by the developer on the procurement side. These costs are included in the price tag.
Since these costs add up to 20-22 percent of the cost, they are quite substantial. After GST implementation, all these taxes will get merged into a single tax i.e. GST. Credits would flow smoothly through the chain. Therefore, experts feel that construction costs will see a marginal decline in the coming years.
High GST rate is a cause of concern
Though everyone welcomes the GST for betterment, property experts feel that the high rate (almost 28) could be a dampener. They fear that the additional gains through incremental credits will be eaten up by GST.
Supreme Court has given the decision about calculating VAT on the construction cost once the sales agreement is done. It has caused a dent on the market, and still, it is grappling with the sudden bump. Since the rule will be applicable after GST regime as well because services and supply of goods will be effective only later the date of the agreement.
For commercial property developers, GST brings new hopes. They have been struggling for quite some time as no credits are available for construction services when they develop a commercial property. Hence, they are burdened with enormous cost pressures.
After GST implementation, they will get a smooth flow of credits. Also, the existing restrictions on credits associated with construction cost will be released (most probably). Thus, developers will find reduced project costs. It will boost the commercial property development.
GST is welcomed mainly because it brings the hope of freedom from multiple taxes that are being levied on the real estate transactions. Since there is a myriad ambiguity in the understanding of rules and regulations, buying and selling property is a pain.
The bill has been awaited by the real estate developers and builders from quite some time. According to finance experts, it is one of the biggest reforms that India has seen post independence. The whole country will be a single market, and the unified taxation will bring further transparency to it. GST will lower down costs involved in the manufacturing, distribution, and logistics.
As there will be an abolition of existing local, state and central taxes by GST, the bill will benefit the sector by improving tax compliance. As a result, a significant drop in construction and development costs can be expected.
How is Daebuild CRM useful in lowering operational hassles?
After GST, there will be a significant reduction in the configuration efforts required in CRM. Daebuild CRM is one of the most advanced and robust systems where users get utmost easiness of use. Not only it brings down operational costs but also gives a handy and user-friendly system to clients and channel partners.
Customer self-help portal of Daebuild is one of the best in the niche. Developer and customer community reap great business benefits. CRM makes the task of managing real estate business simple.
As soon as GST is implemented in India, there will be a great focus on taxability of the transaction. Both landlord and developers will be forced to look into each transaction. As credit will free flow to the system, the margins will increase in the hands of developers. The benefits will get further transferred to the end customers and end users. Since the pricing of real estate is controlled by market elements and not by the actual costs, use of CRM makes it easy.
Sales transactions will become further transparent in the coming years. When the whole country is getting ready for the GST implementation, you should implement CRM system to ensure smooth and seamless transition.