The impact of GST on home loan


Goods and service tax that came into effect from July 1, i.e., bought a home from GST, has received a great gift. Under One Nation One Tax System, investing in under construction properties instead of the ready-to-move houses will make the customers more profitable.

But buying a home will be expensive using ICICI home loan. Where developers will benefit from GST, the buyers will have to pay about 6% more tax. This is the reason, despite the government’s guidelines, developers can avoid the benefit of GST by pass-through on the buyers. However, developers say that in the cheap houses, the buyer can be made on the pass, but due to GST, buyers of MIG and luxury projects will have to pay a higher price. The Byers Association says that GST will harm the buyer, but the developers are also misleading them.

There are many discussions on the Goods and Services Tax (GST) in the market, but most people are unsure about how this can impact on different businesses. In the real estate sector, people are expecting some relief in terms of property prices, because they believe that developers will give homebuyers on the benefits of deducting input costs. Apart from this, the number of existing taxes is expected to decrease and this will be good for the industry only.

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What is the GST on the Ready-To-Move Homes?

The option of a full set of input credits to developers will be available on under construction projects, it will not be applicable to ready-to-stay flats. It means that customers who buy ready-to-stay flats will have to pay a higher price for this

Why would builders like GST: GST expects this project to reduce the cost of the builders. This means that the house will be evencheaper. In the purchase side, the builder fills many types of tax such as Customs Duty, Central Sales Tax, Excise Duty, Entry Tax. They are later passed at the final price of the flat unit and also on the customer. Due to GST, all taxes will come under one, which will reduce the cost of construction. This will not only cause more cash in the market, but also the sale of a home will accelerate.

GST effect on home loan

Citing the impact on Indiabulls home loan, experts say that GST is applicable to financial services at 18 percent. Therefore, the credit processing fee is likely to increase in the GST system. Similar to the current regime, such a GST always keeps the costs in the hands of the buyer.


GST’s suitability on affordable housing

It is important to keep in mind that if GST exemptions have been increased for affordable housing projects (affordable housing has been given exemption currently, by service tax and the government expects an explanation for exemption from GST), then under GST rule Affordable homes can be cheaper.

To pay a higher tax

Buyers now provide 4.5% service tax to developers, while 1% gives VAT and 6% stamp duty during the Registry. In this way, buyers have to pay about 11.5% tax on buying a house, but after July 1, the buyer has to pay 12% instead of service tax.