The impact on real estate sector has always been part of the limelight for any major reform. The implementation of the Goods and Services Tax is of no exception. While the change brings in more transparency and maturity to the sector, the requirements under the anti-profiteering law has been a contentious issue for this sector.


GST had simplified the tax treatment for the realty sector which resolved some of the long-standing issues like valuation and tax type. It is seen as an additional benefit to consumers in the long term. However, this significant benefit primarily would be around increased input credit on the procurement of materials.

The government has issued certain circulars to set clarity in this sector, however, the need of the hour is to set up discussion forums across locations and engage with tax authorities and developers at different levels. This alone can address the concerns of this sector which plays a significant role in impacting the overall sentiment of the economy.

Below are the highlights of the current challenges faced by the developers:

  • A. Currently there is lack of clarity among developers on the exact implications of GST. Developers feel that the exact impact will be understood only after a thorough analysis of the implications on each input cost (in form of labour and raw material, namely steel, cement, bricks, etc.)
  • B. Further, with regard to such raw material inputs — the challenge lies in estimating the cost of these commodities over the entire life cycle of the project. Since the purchase of these supplies is linked to construction progress it is difficult for developers to estimate upfront the costs and input tax credit received for the same.
  • C. There is the complexity of being on the right side of the NAA (National Anti-profiteering Authority) by passing on the benefit of input tax credit to the customer, despite an increase in any other costs. There is no specific mechanism provided for offsetting any other increase in costs against the benefits of input tax credit.
  • D. Tax treatment of ongoing projects which were earlier under the VAT and service tax regime and will now migrate to GST is complex. It is not just a simple change in an excel formula and involves a much deeper understanding of how input tax credit is to be calculated.