GST Council may cut rates on construction material to 18%
The goods and services tax (GST) Council will consider a proposal to reduce GST rates on more items used in construction to 18% from 28%, as the government looks to create more jobs and boost the economy ahead of the 2019 general elections.
If the GST Council approves the proposal in its July 19 meeting, it could be a shot in the arm for both homebuyers and builders. The idea is to bring down taxes to aid economic growth, said a person familiar with the development.
The move comes days after the government’s decision to relax rules that would enable more homebuyers to access the interest subsidy scheme. Industry insiders say that construction activity may pick up pace on the back of the recent moves as it would boost demand, while lowering input costs. “It will be helpful in the long run. Lowering GST will help in construction of more homes and increasing inventory,” said Niranjan Hiranan- dani, president National Real Estate Development Council, and chairman and managing director of Hiranandani Communities.
At present, raw material such as cement and paints come under the 28% tax slab. However, many other items used in construction are in the 18% slab.
“A reduced GST rate on cement would aid in bringing down tax costs for not only individual buyers, but also for businesses, as construction-related GST credits are typically not available,” said Abhishek Jain, partner at EY. “These benefits would further enhance if the GST rate on paints is also reduced to 18%.”
Construction is a labour-incentive sector that contributes 8% to India’s gross domestic product (GDP).