Effect of GST- Real estate & Hospitality in India

Effect of GST on Real Estate Sector

The impact of GST varies from home loans to housing purchase to rentals under various segments and it is indeed difficult to assess the setback on the real estate sector at this stage which will directly affect the final price for a home seeker.

In the new taxation system of GST, the transaction cost goes up to 12% for both services and material. The real estate developers will get the compensation only for the input service tax component. The transaction cost of property will rise by 6%, if no input credit is given by developers however if the developer gives the input credit to the buyer then the rise in the property price could be limited to 1-2%. If the developers give the credits completely and slash down the base prices, then the buyers would hardly get any benefit under the GST regime.

On one hand, GST has made the basic commodities cheaper whereas on the other hand under residential construction services for the developers who are selling residential units before completion to the home buyers would be at the rate of 12 percent. No matter the property is under-construction or constructed, stamp duty will be applicable as per the GST tax regulation in the pre-GST and post-GST regime.

The stage of construction is another area that needs to be considered. If the project is at the initial stage, then more benefits can be expected out of it however if the project is at the final stage, where significant cost has already been done before the GST application, then very little benefit would be there due to little input credit.

Effect of GST on Hospitality Sector

The expected growth in Tourism and Hospitality industry in India is  US$ 280.5 billion by 2026 which is a gigantic figure as compared to the present one.

As per the GST guidelines, the hospitality sector is ready to avail the benefits of standardized tax rates , along with easy and better utilization of input tax credit. The industry is expected to attract more overseas tourists than before as the cost to the end user will go down which means higher revenues for the government resulting into the overall growth of economy however the truth is that it seems challenging for the luxury segment in this sector.

GST Tax rate chart
Room Tariff ( INR) GST Applicable

Less than 1000 0%

1000 – 2499 12%

2500 – 7499 18%

More than 7500 28%

It has made the administrative work easier than before by simplifying the process at Hotels and restaurants. The customer will also have more clarity on seeing a single charge on their bill but when

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