The most significant tax reform ever Goods and Services Tax (GST) comes into effect tomorrow. This will be a historic moment. After considerable deliberations, the GST structure was finalised and is being rolled out.Presently, for land, property and other forms of work contracts, different taxes are levied by the State and central governments.
Transactions are mainly categorised into three areas value of services, value of goods and materials, and value of land.VAT is applied by the State government on the goods portion, while value of services is taxed by the central government. Land transfers entail stamp duty levied by the State governments. With the implementation of GST, there will be no double taxation.
GST is bound to have an impact on each and every sector either directly or indirectly. The full implication will be evident over time, after implementation of the new system.
IMPACT ON REALTY
Presently, a developer incurs different expenses during the construction phase of a project. This involves different kinds of taxes VAT, CST, customs duty, service tax, excise dut, etc. GST will entail credit against taxes already paid on inputs. GST will bring relief to the real estate sector by eliminating the cascading impact of indirect taxes.
This new tax system will bring a lot of transparency to the real estate sector. Under the GST system, the parties will get credit for the VAT and service tax charged by different contractors, and excise duty, entry tax, octroi etc paid on inputs. They will be required to pay tax only on the value additions. This, in turn, is expected to lower the overall tax burden.
IMPACT ON CONSTRUCTION
Construction of a building will benefit from the rates declared for cement, bricks and iron under the GST.Now, many of the construction materials are under the 18 and 28 percent slabs. Cement and prefabricated structural components for construction or civil engineering will be taxed at the rate of 28 percent under the GST. This is higher than the current average rate of tax of around 25 percent, but many of the additional taxes charged over the average rate will be subsumed by the GST.
Iron rods, steel and steel products used in the construction of buildings are mostly in the 18 percent which is similar to the current average rate of 19.50 percent. However, as the input tax credit is available on products used for construction, the overall tax incidence will be neutralised.This input tax credit is available to a developer if the sale is executed prior to obtaining the completion certificate or prior to first occupancy.
IMPACT ON UNDER-CONSTRUCTION PROJECTS
The projects under construction are covered by the GST system through the works contracts. In this case, GST will apply to the materials that a developer procures to build a residential project.Hence, it will have a direct impact on the overall cost of construction.
The GST rate for underconstruction property has been set at 12 percent. Input tax credits will be available to developers here too.
NO IMPACT ON COMPLETED HOME
Buyers of completed residential projects will not be affected by GST, as they have already paid the statutory charges such as stamp duty and registration charge on the transaction. In case of a ready-to-occupy property, if the occupancy certificate for the project has been received, GST will not be applicable.
IMPACT ON LET-OUT COMMERCIAL SPACES
GST will be levied at 18 percent on commercial property that is rented out. Unlike under the service tax regime, the threshold limit for applicability of GST has been increased from Rs 10 lakhs to Rs 20 lakhs. So, many commercial property owners who were covered under the service tax regime will go out of the indirect tax net under the GST.
The acorn which was planted by the great visionary Kempegowda, has grown into an oak that is Bengaluru. It was Kempegowda who designed the dna and the template of Bengaluru, the information technology and biotechnology city.
Kempegowda I, the founder of Bangalore was ancestor of the Yelahanka Nada Prabhus. He raised a mud fort and founded a township within it in 1537 AD.
Kempegowda called the new fort and township Bengaluru, a name which already existed in antiquity and found in an inscription at Begur. Kempegowda ‘s foresight was beyond the horizon. The city grew beyond the confines of the fort. And today the City has grown beyond the Ring Road.
Kempegowda was a master builder. The fort, the town, tanks and temples were his pioneering efforts over a period of nearly 50 years of his rule. He laid, what can be considered as, the foundation of modern Bengaluru.
The man who founded Bengaluru was a pioneer in many ways. He was the great grandson of Jaya Gowda, who established a separate dynasty, the famous Yelahanka Nada Prabhus. Kempegowda I ruled for 46 years commencing is reign from 1513.
He conquered the surrounding areas and extended the Yelahanka principality. He became the envy of neighbouring palegars (chieftains). But what made him really great was his incessant constructive activity and the concern for the welfare of his subjects. He constructed, tanks, lakes, temples and forts (including minor forts) and agraharas, something similar to today’s layouts.
Kempegowda began his adventurous career with raids on the neighbouring principality of Sivagange, which 30 years later he added to his principality. Next he turned his attention to Domlur, a place of some importance since the days of the Cholas, and annexed it to his kingdom. Kempegowda took possession of this area and allowed the forest to grow thicker since it provided a natural barrier and thus gave protection to his principality.
Somewhere within this vast area lay the spot on which Kempegowda was to erect a fort. Years later he built a township here. This township became what is today’s Bengaluru. It is believed that “Hale Bengaluru” (Old Bangalore), a hamlet in today’s Kodigehalli, near Hebbal, was to lend the name to the new township.
Kempegowda brought Halasur (ulsoor) and Hesaraghatta under his principality. He tapped the economic potential of these regions by bringing vast areas under cultivation by constructing tanks, digging wells and cutting canals across arable land. His reputation rose and he became a popular chieftain.
But his crowning glory was the founding of Bengaluru in 1537. He chose an auspicious day to commence his town building work. One fine morning on 1537 four bullocks were assembled at a place which is today’s Dodpet Square, in the heart of the City. The bullocks were harnessed to four ploughs. The were driven by young men furrowing the ground in four directions up to the limits marked. The routes traversed by those four ploughs became the nucleus of the new town’s four main streets.
Thus were laid Bengaluru’s oldest streets – Chickpet and Dodpet. These narrow streets continue to exist to this day and are the busiest commercial centres of Bengaluru. A strong mud fort was erected around the township. Within this fort walls were localities (called pete) earmarked for different trades and occupations.
Kempegowda then shifted his capital from Yelahanka to Bengaluru. He invited skilled artisans to the town and patronised them increasing the commercial prosperity of the place.
Territorial additions of the villages of Begur, Jigani, Varthur, Kengeri, Banavara and Kumbalgodu, familiar names of places on the outskirts even today, increased the importance of Bengaluru, his capital. Kempegowda’s fame spread far and wide and today his name adorns the international airport at Devanahalli.
Kempegowda’s long reign was marked by monuments and structures found even today. The cave temple of Gavi Gangashareshwara at Gavipur, the Basava temple at Basavanagudi, Kempambudhi and Dharmambudhi tanks. His successors continued his work with the addition of Halasur lake, Karanji tank, Sampangi tank, Ranganatha temple and Someshwara temple at Halasur.
Kempegowda’s successors immortalised him in inscriptions and statues. There are figures in Someshware temple in Halasuru and identical carvings in Hampi.
There is a small statue of him with folded hands, which exists in the principal temple at sivagange, on the outskirts of Bengaluru. This exquisite statue has an inscription in Kannada: Kempegowda, son of Kempacharya Gowda, of Bengaluru, who is always making obeisance to the feet of Lord Gangadhareshwara.” It was excuted nearly 50 years after his death by his successor.
On 1st November, 1964, by the then Corporation of Bangalore City had his statue erected in front of its main office in the Narasimharaja Square.
Until recently, the location of Kempegowda’s tomb was not known.. However in September 2015, Karnataka Ithihas Academy has confirmed that the tomb found in Kempapura village near Magadi is that of Bengaluru founder Kempegowda I.
The Kannada inscription on the tomb says it is that of Hiriya Kempegowda (Kempegowda I) who died at the spot while returning from Kunigal.
Until the tomb was discovered local people were not aware of the historical significance of this tomb, which was covered with shrubs and weeds.
An expert team set up by Bruhut Bengaluru Mahanagara Palike (BBMP) reaffirmed that the tomb found near Magadi is indeed that of Bengaluru founder Hiriya Kempegowda, and that it was put up at the place where he died while fighting a war. The BBMP has allocated funds for the development of the tomb.
The Bengaluru realty market is all set to get a much-neeeded boost with the Metro Green Line connecting the East-West and North-South corridors, covering 42.3km.With the recent launch, realty on Metro routes will become hot property , and sensing the windfall, the state government is working on an increased Floor Area ration (FAR) policy for commercial and residential buildings within 200 metres of Metro stations and this could be beneficial for the real estate sector. The government also plans to raise guidance value rates along Metro routes, possibly in November, as part of its annual exercise.
“Real estate prices zoomed 150% in areas closer to Metro stations over the past five years but the guidance value has gone up by just 20%-30%. Now we expect prices to go up by a further 10%20% in the next quarter and we assume it needs some value correction,” said a senior official of the state revenue department.
Industry players hope the boost of property prices along Metro routes will help infuse new lease of life to the market.
Harish Achar Brahmavar, founder-director, Homz N Space, said property sales are growing more towards surroundings of Metro terminus when compared to other zones. While there has been steady growth of 12%-15 % along the Purple Line on the eastwest corridor, he said there could be higher appreciation of property value along the Green Line.“We are projecting growth in areas like Jalahalli, Peenya, Yeshwantpur, Rajajinagar, Sampige Road, Krishna Rajendra Market, South End Circle, Jayanagar, Banashankari, JP Nagar and Puttenahalli,” he added.
Om Ahuja, CEO-Residential, Brigade Group, said: “As the Green Line connects industrial hub (Peenya) with commercial hub (Central Business District) and cultural hub (South Bengaluru), business houses and offices are likely to relocate their offices closer to the Metro line to save on travelling time and ex penditure incurred by employees. Since prices in these zones are fairly undervalued, property values will witness further 15%-20% jump in the next 2-3 quarters. Rentals too for the existing supply will shoot up in the coming months and new supply will start witnessing minimum 10% premium to other zones in Bengaluru.” C N Govindaraju, managing director, Vaishnavi Group, said residential real estate will be a major beneficiary . Over the past two years or so, he said they are seeing a marked customer preference to buy into a project due to its proximity and or accessibility to Metro stations. “This will help build good and healthy sale traction for residential projects along the Metro line.The rates of residential apartments and land value are also likely to go up,” he added