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Everyone is wishing the cost of all products and services should come down. But the dream of common citizen is always kept as a dream and it never came real. The campaign towards implementing the GST projected an image that the post regime of GST the price of products and services will fall. It is the prayer of many that if not a free fall in price there should not be any increase on it. Is it true that the price will fall post GST regime? There are many products which are already under exempted category are brought under the taxable category. The rate of has also fixed at higher slabs for many products and services.

Construction industry is also facing the issue of increase in cost with the implementation of GST. The service tax rate which is presently at 15%  out of which compounding facility is available for 60% where by the tax shall become payable only to the tune of 40% of the total price if land value not included. If the land price is also included then the compounding rate is fixed at 75% where by the service tax shall become payable on 25% of the total value of a new flat.

Similarly the VAT rate falls under 2% category under compounding system. Under VAT the tax is not payable on the value of land transferred since land is not a goods.

However under GST regime the rates are fixed at 12% for the total value which includes land cost also and 18% if the land cost is not included. This rate will also apply for works contract which involves no land price. The argument of the law makers will always be that the input GST shall become adjustable. But they fail to understand that the liability of a buyer is fixed which shall be paid only by the buyer.

The following table explains how the cost is shooting up under the GST regime for property purchase.

Particulars Rate Pre GST Regim Under GST Regim With land Cost Under GST Regim No Land Cost
Total Value of the Flat

    1,00,00,000

1,00,00,000

1,00,00,000

Land Value –  GLV

       25,00,000

 25,00,000

25,00,000

Flat Value

 75,00,000

75,00,000

75,00,000

Statutory Cost
Vat 2%

    1,50,000

                      –

                     –

Service Tax 6%

    4,50,000

                      –

                     –

GST 12% / 18%  12,00,000

13,50,000

Regn Cost to the Land
     Stamp Duty 7%

    1,75,000

      1,75,000

1,75,000

     Fee 4%

    1,00,000

          1,00,000

                  1,00,000

Regn Cost to the Agreement 2%

    1,50,000

    1,50,000

 1,50,000

Total Cost to the Govt

 10,25,000

16,25,000

17,75,000

Increase in overall cost to the government

  6,00,000

 7,50,000

 

From the above it is very clear that the cost will shoot up just because of new tax regime. The impact under the above said example is from 6% to 7.5% increase. The value of land whether high or low will have no impact on the cost since the GST to be paid on total value @ 12%  and @ 18% rate on the flat value if land value not included.

Those who took their decision before the GST regime are benefited by few lakhs for sure.