A major beneficiary of the revised GST rate of 12% on Construction Projects could be the Maharashtra State Government. The State Government has reportedly asked for rebates from contractors handling the Mumbai Metro Project. The previous GST rate on the construction project was 18%. Post the new GST rates, there could be a substantial decline in the overall cost projections of the Mumbai Metro.
The issue was discussed in a recent meeting held between Mumbai Metropolitan Region Development Authority (MMRDA) — Government of Maharashtra and officials from the private construction firms part of the Mumbai Metro Project. The MMRDA which looks over the infrastructure development of the Mumbai Metropolitan Region had raised the question of the rebate before the officials. Fuelled by the 6% GST Rate reduction, the MMRDA stressed that the overall project cost will reduce by a considerable fraction. On the other hand, the Contractors expressed their inability to refund the entire 6% of the difference.
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This called for an intervention by the GST Commissioner, Maharashtra. Accordingly, a meeting was arranged at GST Bhavan between MMRDA officials, the GST Commissioner and construction firm representatives. A few key takeaways from the meeting include:
- The difference of rebate needs to be passed on to the MMRDA.
- The actual rebate value will be decided post audits of the submitted bills by the construction firms as well as keeping in mind the input tax credit and the tax scheme (composite or other) used by the construction firm to pay GST Tax.
Reportedly, Infrastructure Project costs follow an upward curve towards their completion. However, the rebate will negate some of the increased cost. The GST Commissioners effort in this regard to arriving at an amicable solution is praiseworthy.
A few projects which are currently in the execution phase and will benefit tremendously from the rebate are:
- Rs 6,410 crore project for 18.60 km long Dahisar East-DN Nagar Metro 2A.
- Rs 6,208 crore project for 16.50 km long Dahisar East-Andheri East Metro 7 route.
