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Zero-sum Game

Rashmi Pratap     March 8, 2019

Reduction in GST for real estate may not result in a price reduction for prospective homebuyers. Agreed that the government wants to push up sales by slashing GST from 8 to 1 per cent on 'affordable' homes and from 12 to 5 per cent on 'premium' homes.

At the same time, the government has reduced input tax credit, meaning developers cannot claim a reduction in taxes due on output from the taxes they have already paid on input. With wafer-thin margins, developers are not likely to let go of any opportunity to escalate prices and are already considering a 3- 4 per cent rate increase.

Effectively, buyers may end up spending the money they save on reduced GST, on higher per-square-foot rates.

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