Ever wondered how changes in tax rules can impact your real estate investment? Here’s a heads-up for you.
The GST Council, a key government body that decides tax regulations, is expected to confirm soon that Real Estate Regulatory Authority (RERA) won’t be paying Goods and Services Tax (GST).
Let’s keep the jargon aside, this simply means that there might be some changes in how your property transactions, especially concerning taxes, are handled.
So, whether you’re a future homeowner or a real estate investor, this news could potentially impact your dealings in the property world.
RERA Likely to be Exempted from GST
The GST Council is expected to announce that the Real Estate Regulatory Authority (RERA) falls outside the Goods and Services Tax (GST) net.
RERA is a regulatory body set up by individual state governments that facilitates transactions in the real estate sector, providing transparency, consumer protection, and a speedy resolution of disputes.
Because RERA is covered under Article 243G of the Constitution, which pertains to the powers, authority, and responsibilities of panchayats, it’s likely to be exempted from GST.
State-Funded RERA and Implications of GST
RERA authorities receive their funds from respective state governments. If GST is imposed on RERA, it would result in taxing the state governments, which would be counterproductive. Thus, it becomes a primary reason for RERA’s likely GST exemption.
GST Exemption and RERA Precedents
Various regulatory bodies like the Reserve Bank, the Securities Exchange Board of India (SEBI), the Insurance Regulatory and Development Authority (IRDA), the Food Safety and Standards Authority of India (FSSAI), and the Goods and Services Tax (GST) network were exempt from GST until July 18, 2022. The termination of these exemptions has instigated a review of RERA’s taxation status.
Potential Benefits of Exempting RERA from GST
RERA’s expected exemption from GST might bring significant benefits to the real estate sector. One of the chief among them is the possible reduction in expenses for developers and home buyers. Input Tax Credit (ITC) is not possible in the residential real estate sector, meaning that excluding RERA from GST considerations could help reduce expenses.
Conclusion
The GST Council’s potential clarification on RERA’s exclusion from GST would be a welcome development for the real estate sector. If this exemption is confirmed, not only would it eliminate the anomaly of taxing state-funded bodies, but it could also result in financial benefits for both developers and homebuyers. RERA’s core purpose is to bring more fairness and transparency to the real estate sector, and this potential tax exemption aligns well with this mission. However, the official decision is yet upcoming, and the real estate sector eagerly awaits the verdict.