An Overview of GST Regime Proposed Changes
An Overview of GST
Regime Proposed Changes
Online GST Return was over a year ago that the India government issued its tax policy with
the intent of reducing GST risk. The current follow-up document recently
released and headed for legislation incorporates some changes that investors
need to be aware of.
Associated Transactions
A glaring omission in this new document is the removal of
disallowing GST input claims for real estate transactions involving an
unregistered vendor. The test for association between parties was proposed to
be the same regardless of whether or not the seller is registered. Fortunately,
this provision is no longer included which is good news for property investors
buying from an unregistered vendor.
Domestic Reverse Charge
System
Online GST Return The domestic reverse charge system refers to the purchaser returning and
claiming GST for land transactions. This applies only to transactions between
GST registered parties. If a registered vendor sells a piece of property for
the agreed upon purchase price plus GST, that party must claim the output tax
whilst the purchaser claims the input tax. The idea is that this regulation
will reduce instances where the GST is not paid to the IRD and also prevents
the IRD from paying out the tax.
Nomination Transactions
Online GST Return Real
estate transactions involving nominations will eliminate any possibility of
there being two supplies considered. Currently there is some speculation that
nomination transactions actually involve more than one supply and this new
proposal considers the party ultimately nominated to be regarded as the sole
recipient.
Change in Use Rules
The government is proposing that input tax deductions be
brought into line with actual use. Right now a purchaser can claim GST if the
principal purpose of buying the asset relates to an activity that is taxable.
Adjustments are necessary if the asset is then applied to a non-taxable
concern. The new proposal requires that the claim be paid at the time of
purchase and will only require adjustment if the asset is used for a different
purpose than originally planned.
Mortgagee Sales
Online GST Return This part of the document applies to sales that take place prior to the
mortgagee taking possession of the property. An "in substance" sale
will be subject to the same regulations as a mortgagee sale in terms of GST
owed. This is clearly a way to ensure that the IRD is able to collect GST even
on transactions where there is no formal sale to a mortgagee.
Commercial Dwellings
New definitions for commercial dwellings are in store. The
government is expected to make the definition of those properties which fall
within the GST regime much clearer, ending debate regarding homes used for
holidays or as serviced rentals. Short-term renting of real estate will be
considered a commercial concern when there are no tenants continually occupying
the residence.
It is not expected that these proposed to the GST regime will
go into effect until 2010 after facing several rounds public submission and
Parliament legislation. As these changes will affect investment property
owners, it is essential to stay informed.
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