Will Lower Tax on Construction Material by GST Council Reduce Costs?
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Synopsis
The GST Council's recent decision to lower construction material taxes promises to reduce construction costs significantly. This change could enhance project viability, improve developer margins, and make homes more affordable for buyers, marking a positive shift in the real estate sector.
Key Takeaways
- GST tax rates on construction materials have been reduced.
- This change is expected to lower overall construction costs by 3.5-4.5 percent.
- Improved affordability for home buyers may result if savings are passed on.
- Cement tax reduced from 28% to 18%.
- Other materials like marble and granite also see tax reductions.
New Delhi, Sep 5 (NationPress) The GST Council's decision to revise tax rates on construction materials is projected to bring some much-needed relief to the real estate industry, leading to an overall decrease in construction costs by 3.5-4.5 percent, according to a report released on Friday.
This adjustment is set to enhance project viability, bolster developer margins, and — if partially transferred to consumers — improve home affordability, as noted by Crisil Intelligence.
The government's initiative to shift cement taxation from 28 percent to 18 percent is anticipated to yield significant savings in construction expenses.
As cement constitutes a crucial cost element, making up 25-30 percent of raw material costs, this reduction is expected to positively influence developer margins and lower overall project expenses, the report highlighted.
While the tax on steel remains steady at 18 percent, reductions have been made on marble and travertine blocks, granite blocks, and sand-lime bricks, which now face a tax drop from 12 percent to 5 percent. This change is particularly beneficial for mid-range and premium projects that utilize these materials extensively.
The report further states that this tax reduction is likely to enhance developer margins and decrease project costs, given that construction materials typically account for 50-60 percent of total construction expenses.
The 10 percentage point cut in GST on cement is estimated to yield a 3.0-3.5 percent overall savings on construction costs.
Additionally, the tax rate adjustments on marble, granite, and similar inputs are expected to provide an extra 0.5-1.0 percent saving.
The reform of GST on construction materials is anticipated to offer the real estate sector some relief, despite property tax rates remaining stable, thereby maintaining a sense of consistency in taxation.
The rates for affordable housing (1 percent), under-construction properties (5 percent), and completed properties (exempt) are unaffected, as per the report.
Point of View
I believe that the GST Council's recent tax adjustments on construction materials reflect a balanced approach that aims to stimulate the real estate sector while maintaining stability in property taxation. This move is likely to benefit developers and home buyers alike, fostering growth in the housing market.
NationPress
05/09/2025
Frequently Asked Questions
How much will construction costs decrease due to the new GST rates?
Construction costs are expected to decrease by 3.5-4.5 percent as a result of the GST Council's tax rate rationalization.
What materials are affected by the new GST tax rates?
The new GST rates affect cement, marble, granite, and sand-lime bricks, among other construction materials.
Will the changes in GST affect home buyers?
Yes, if developers pass on the savings from reduced taxes, home buyers could see improved affordability.
Are property tax rates changing with the new GST adjustments?
No, the tax rates applicable to property remain unchanged, ensuring stability in taxation.
What is the expected impact on developer margins?
The reduction in GST is expected to improve developer margins by lowering overall project costs.
