PROPERTY PRICE RISE AND GST AFTER 1-7-2017
Earlier-There was VAT and alternatively Composite Tax and Service Tax on the construction industry
NOW BOTH ROLLED INTO ONE-CALLED GST
Under GST the Service tax is 12%.
It has been learnt that customers willing to buy a nearly-completed house/flat will have to pay 12 per cent service tax on the entire amount, which is almost 7 percent higher than the previous rate of 4.5 percent. In addition, if customers are paying for their house in instalments, they too, will have to pay to 12 per cent service tax from July 1 onwards.
There is almost a 7.5 percent increase in such taxation after the GST regime comes into effect, as they will not be able to claim any credit for the taxes paid on inputs bought before July 1.
The invoice issued by the builder after July 1 will surely attract a GST rate of 12 per cent, forcing developers to write letters to clients briefing them about the situation. It is also true that many builders have not issued VAT Bills to the home buyers and many have not issued Invoices for the buildings or apartments sold.
Many home buyers are not aware of taxation issues like, earlier VAT and Service Tax and Now both combined is GST, rolled into one.
More clarification is required to remove the confusion among the builders as well as the home buyers and if required few sections might be Amended.
The Government of Karnataka was deliberating and discussing the important issues and points of RERA, which had been notified by the Center and other states, but, will be notifying it soon without much MODIFICATION/CHANGE/ALTERATION.
This notification has very significant effect on the REAL ESTATE market and will bring about transparency and stability in the business.
The most important aspect of this Bill, that the ILLEGAL AND UNAUTHORISED CONSTRUCTIONS will be STOPPED. Already, the fly by night builders and some VIOLATORS are out of business. The deviation and violation might be controlled.
The under construction or incomplete projects might also come under this Bill. The common man will definitely be benefitted by this bill to a great extent.
BUT, AS INDIANS, WE HAVE TO WAIT AND WATCH TO PLUG ANY LOOPHOLES IN THE BILL.
On the otherhand, the half baked and untested GST bill is also implemented from 01-07-2017 and there are various versions of its advantages and disadvantages of this BILL being deliberated and discussed across the country.
But, over all, the GST includes both service tax and the (earlier) VAT. There is confusion over the benefits and its procedures in the minds of the builders, similarly, AS INDIANS, WE HAVE WAIT AND WATCH.
DO NOT JUMP INTO CONCLUSIONS AND TAKE ANY DECISION NOW.
WAIT FOR SOMETIME, FEW MONTHS TO KNOW THE AFTER EFFECTS OF THESE BILLS.
The State Government has increased the Guidance Value or the Circle Rates or the Market Price of the property in Bangalore Urban, Bangalore Rural District and Ramnagar District with 15 days notice to submit the objections, if any, with supporting documents or evidence.
In some areas, the increase is very steep and on an average the increase is around 10% only. The consequent effect will be strain the buyers. With this increase, the Income Tax, VAT, Service TAx and Capital Gains tax will also goes up, indirectly.
The Income Tax department is also scrutinising many transactions, wherein the buyers in collusion with the sellers/agents/builders have underquoted the property consideration below the guidance value. The department may initiate penal action on such buyers and sellers soon. The Guidance Value is treated as the Fair Market Value. The property value or consideration must not be less than the guidance value as per the Finance Act.
THE APARTMENT OR FLAT BUYERS MAY NOT NECESSARILY BOTHER ABOUT THE TAX ISSUES OF THE PROPERTIES BOUGHT BY THEM, LIKE VALUE ADDED TAX AND SERVICE TAX.
IN MAJORITY OF THE CASES, THE SELLERS, HAVE COLLECTED THE VAT AND SERVICE TAX THROUGH EMI/INSTALMENTS OR ONE TIME PAYMENTS, HAVE NOT DEPOSITED THE SAME WITH THE CONCERNED DEPARTMENTS OR MISREPRESENTED THE FACTS AND HAVE DEPOSITED MUCH LESSER THAN WHAT THEY HAVE COLLECTED, INCLUDING ALL TOP CREDAI BUILDERS.
MAJORITY HAVE NOT FILED INCOME TAX RETURNS, IN MANY CASES, MISREPRESENTED AND MANIPULATED THE ACCOUNTS AND SUBMITTED WRONG RETURNS.
THE COMMERCIAL TAXES DEPARTMENT HAS WOKEN UP AND RAIDED SEVERAL BUILDERS LIKE MANTRI, DS MAX, EMBASSY AND NITESH AND COLLECTED OVER 140 CRORES IN THE ARREARS OF VAT COLLECTED BY THESE BUILDERS FROM THE BUYERS OF THE PROPERTY.
IT IS TO BE NOTED THAT THESE BUILDERS COLLECT THE VAT OR COMMERCIAL TAX FROM THE BUYERS, IN THE EMI AND NEVER PAID IT TO THE GOVERNMENT.
FURTHERMORE, THERE ARE MANY SMALL TIME DEVELOPERS WHO ARE ABSCONDING OR ADDRESS LESS NOW OR WILFUL AND DELIBERATE TAX EVADERS HAVE NOT BEEN BROUGHT INTO THE NET.
IF THE DEPARTMENT ACTS DILIGENTLY, IT CAN COLLECT OVER RS1000/- CRORE OF THE TAX PAID BY THE BUYERS OF THE PROPERTIES.
MAJORITY OF THESE LEADING TAX EVADERS HAVE NOT ISSUED VAT BILL-TAX BILL- TO THE BUYERS OF THE PROPERTY.
ANOTHER GREY AREA WHERE SERVICE TAX PAID BY THE BUYERS OF THE PROPERTY HAS BEEN MANIPULATED AND TAXES COLLECTED HAD NOT BEEN DEPOSITED WITH THE DEPARTMENT.
IT HAS BEEN WIDELY REPORTED THAT THE COMMERCIAL TAXES DEPARTMENT HAS INITIATED PROCEEDINGS AGAINST THE REALTY MAJOR `xxxxx` AT BANGALORE FOR THE RECOVERY OF TAXES ON ITS PROJECTS ON DEVANAHALLY ROAD AND OTHER AREAS.
AS REPORTED EARLIER, NOTICES HAD BEEN ISSUED TO FEW REAL ESTATE COMPANIES IN BEGUR, BANNERGATTA ROAD AND THE DEPARTMENT IS INVESTIGATING INTO THE AFFAIRS OF THE OTHER DEVELOPERS, WHO HAD MANIPULATED THE ACCOUNTS TO EVADE VALUE ADDED TAXES.
ANOTHER MAJOR REAL ESTATE COMPANY WHICH HAD BEEN SLAPPED WITH A NOTICE OF ABOUT RS10 CRORES BY THE DEPARTMENT, MAY SEIZE/ATTACH THE BANK ACCOUNT SOON.
THE COMMERCIAL TAXES DEPARTMENT MIGHT ISSUE A DEMAND NOTICE FOR THE COLLECTION OF VAT Etc., TO THE DLF, IN RESPECT OF ITS RESIDENTIAL PROJECT AT HULIMAVU, BEGUR HOBLI, BANGALORE SOUTH THALUK SOON.
THE SAME TREATMENT WILL BE METED OUT TO THE OTHER PROJECTS IN THE SAME ROAD SOON.
THE GOVERNMENT OF KARNATAKA HAS PROPOSED INCREASE THE VALUE ADDED TAX FROM 5% TO 5.5% AND 14% TO 14.5% ON ALL THE SCHEDULES AND PRODUCTS AND THUS THE PRICES OF ALL THE PRODUCTS AND SERVICES, WHICH ARE AFFECTED BY VAT WILL BE INCREASED BY 0.5% FROM 01-08-2012.