Will GST make under-construction properties cheaper or more expensive?

02 June 2017

Will GST make under-construction properties cheaper or more expensive?

Although the Goods and Services Tax (GST) rates have already been finalised on most of the goods and services, calculating its real impact appears to be a mammoth task, especially for under-construction properties. The GST is aimed at reducing tax complications and the overall burden of double tax, from the economy. Thus, ideally, it should not lead to an increase in the cost to the buyers. Under the tax regime, many of the construction materials are under the 18 and 28 per cent slab. For example, steel and steel products, are mostly in the 18 per cent segment and cement and prefabricated structural components for building or civil engineering, are in the 28 per cent slab. However, as the input tax credit is available, the overall tax incidence should be neutralised. For example, according to an official release, packaged cement is currently subject to central excise duty of 12.5 per cent + Rs 125 PMT and a standard VAT rate of 14.5 per cent. Over and above, there is central sales tax, octroi and entry tax that vary from state to state. The total tax burden is calculated at 30-31 per cent, which is 2-3 per cent more than the proposed GST rate for cement. If we apply the same logic to all the goods, probably, the tax that is incident, will be lower.