Decoding Input Cost Credit
While many argue that GST has been unfair to real-estate sector, according to Rahul Shah, CEO, Sumer Group, it is very important for the consumer to understand the concept of input cost credit The nation woke up to a new tax regime on the morning of 1st July 2017. The Goods and Service tax (GST) was finally rolled out across the nation. For a few months now, Indian Real-estate sector has faced momentous challenges- demand concerns, demonetization, RERA, supply side issues and GST. While these changes had a material impact on the launches and demand, many believe that the transparency will improve materially going forward. This will not only lead to higher consumer confidence but also weed out unorganized developers. Currently, GST is applied at the rate of 12% on the sale of a property excluding stamp duty and registration. At the first instance, this tax rate would look staggering, but many tend to forget that this will be offset by high input cost credit. If one were to go by pure textbook definition, input cost credit may be defined as the credit manufacturers received for paying input taxes towards inputs used in the manufacture of products. Now, this gets tricky when it comes to real-estate sale. Assume that a property is being sold for Rs. 100. From a consumer’s point of view, if he was to keep aside stamp duty and registration, he will pay Rs. 112 to the developer at the time of handing over the property. It is natural for any consumer to believe that he is paying at least 5-6% higher tax than it was during the previous tax regime. This is where, he will need to understand the concept of input cost credit.
| Cost of the property | 100 |
| GST @12% | 12 |
| Total cost excluding stamp duty and registration | 112 |
| Cost of Cement | 10 |
| GST @28% | 2.8 |
| Total Cost | 12.8 |
| Cost of Steel | 10 |
| GST @18% | 1.8 |
| Total Cost | 11.8 |
Tags : EXPERT ZONE
