New Delhi: Here is the another good yet effective benefit of GST, housing price may fall down up to 5% after it is applicable from July 1. Centre decided to peg the levy at 12% on ready-to-possess houses and flats.

Logically, permitting credit for taxes on inflows of cement, steel, paints and other items will lower the weight on builder’s shoulder. Say, Rs 1 crore flat’s price will get Rs 3-5 lakhs flat discount.

4.5% service tax was levied on the final price for home buyers during the possession, which will now be ‘Not Applicable’ after GST.

Due to this benefit, critics says it a customer-friendly move and would lead to either lower tax liability or be tax neutral.

Country’s top level developers welcomed the 12% group of GST which will benefit to both, customers and builders. They showed a strong hope to control real estate price and affordable houses.

Here is one effective example: When developer works with contractor and build a site for 2000 per sq. ft. He will have to pay 18% tax to contractor on the amount at which he is completing the work. That means, developer has to pay 360/- per sq. ft. to contractor. When developer sells the house to consumer at 3000/- per sq. ft., which is affordable price at present, he will have to pay tax at 12% i.e. 360 per sq. ft.

So, he has no extra profit from taxes itself.

Also, if other taxes and random expense is included, he can claim only up to the fresh tax liability. But the best thing is that buyer who paid service tax of 4.5% will not be levied now under GST.

One thing is taken into consideration is, if developer keep big margin between contractor and buyers, especially in premium segment house, his net tax liability will not be nil. In this case, scenario can be changed. he will have to pay Rs 300 per sq ft or 3%, which he will recover from the customer to adjust the government taxes.