A lot of buzzes is going around GST in the real estate market. Seems like the present Govt. has vowed to make India free of black money. Real estate is the home of most of the black money. Secondary real estate market or the resale market is an unregulated one and many current reforms are in the direction to stabilise it. RERA, the ban on Rs500 and Rs1000 notes and GST; the system is really evolving for good. The revolution that these steps are bringing is really significant. This would not only empower the people earning honestly, it would also help consolidating the Indian economy.
To save on the taxes, many dealers do not register the transaction and this leads to unaccounted money called black money. Indian tax system is fairly good but there is no provision to track continuously each transaction and identify the illegal one. Thus, black money is increasing, especially in the real estate sector. To bring more control and transparency in the tax system, the GST is to be implemented, hopefully by next year.
When the VAT, service tax etc. are not filed with the Income tax department of India, the whole dealing money goes without paying the indirect and direct taxes. Some of the dealers keep the â€˜kacchaâ€™ bill for the customers which signifies the transaction but cannot be presented as a proof in the court. Thus, the buyer gets to save some on the deal. The articles that are sold without the â€˜pakkaâ€™ bill are cheaper as the dealer is saving the taxes and he is happy to cut some slack to the buyer too.
Whatâ€™s the big picture?
We know that generation of black money is one result of not paying the taxes but this is not it. The unaccounted money can be used for the terrorist activities in the country. It can create a chaos which is never beneficial for anyone.
When the dealer sells the things at a lesser price in lieu of â€˜kacchaâ€™ bill, the competition among the dealers is ignited and they adopt more illegal activities to stand upright in the market. This may be degrading the quality of the product or luring the customers into false promises.
The tax structure of different states is different. Sometimes, it is hard to understand how to comply with them. As such, the dealers avoid paying taxes and becomes a part of smuggling.
GST, so that no one does not pay taxes because all this is too complex. GST combines all the direct and indirect taxes and to be paid once. Each and every transaction would be tracked against the mandatory ID number for the tax implications. The ID can the aadhar number or PAN of the dealer. Thus, the Govt. would be tracking all the transactions and no money would go unaccounted.
All the states would be having the unified tax system and thus, tax frauds would be eliminated. Also, in addition to the state authorities, the Central Govt. would also be tracking the same. This would leave no space for tax frauds. The promises of the GST look great but the future would unfold the reality.
We just hope that the Indian real estate gets to restore the lost glory and gain the trust of the investors with transparency. Black money should and would be eliminated in due time. But we all have to play our parts in this initiative. For any Jaipur property related query, you can contact us freely.