In the recent 34th GST council meeting there were a lot of changes brought into the real estate sector regarding the rate cut over under construction properties. However, the finance minister has assured that the next meeting agenda would be cement rate reduction.
Currently, the GST rates charged on Cement is 28% but would be decreased to 18% which is a considerable margin and would cause a loss of Rs 13,000 crore annually to the Government.
The Government also wants to ensure that the end user benefits by these rate cuts, as the lowered price of cement would ultimately bring down the rates of the affordable and unaffordable houses. The Council has been directed to pass on some guidelines which ensure that the manufacturers pass on the benefits of the rate cut to the consumers.
The Cement Manufacturers Association had urged for a cut in the GST to 18 per cent, which according to them would boost infrastructure spending and will also increase jobs opportunities, hence, reducing the buying cost.
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Union minister Arun Jaitley recently passed on a message that lowering the GST tax rate on cement was a priority as it is the only commodity which is used by the common man and to the dismay, it is being taxed at the highest slab.
“Since the government and its agencies are one of the largest consumers of cement, the necessity of passing on GST rate cuts, whenever the rate reduction takes place, could result in some guidelines being issued as part of the rate reduction process,” said M.S. Mani, partner, Deloitte India.
As per the analysts, cement accounts for a major portion of construction costs, and a significant 10 percentage point reduction in the tax would be a major relief to buyers. The tax rate cut on cement supplies would certainly increase the demand while increasing the revenue from this commodity.
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In summary, the GST council has brought down the GST rate on the non-affordable house at 5% while the affordable housing scheme will be attracting a 1% GST rate. In the rate reduction, the real estate community will not be getting ITC refund while there certain other condition based on the area of the construction.
