GST rate for construction and building materials

This article discusses in detail the tax you have to pay as GST, on various building materials

To subsume almost all indirect taxes in India, except for a few state taxes, the government, in 2017, launched the Goods and Services Tax (GST) regime that is in line with globally-accepted tax regimens.

The Goods and Services Tax (GST) covers real estate in India through works contracts and building and constitution works, as all components used in the development work attract GST. To put it simply, covered under the new regime is the Indian construction industry, which continues to attract high rates of taxes through a blend of levies imposed on the purchase of various building construction materials.

In spite of the many policy support measures that have been announced by the government and the banking system and several discount offers launched by the builder community, rates of properties in India’s most active markets continue to move upwards, on the back of a spike in rates of building and construction materials. In the past few months, leading to September 2021, prices of construction materials have shown nearly 20% increase, primarily because of supply concerns. With no correction in GST rates, developing residences continues to be pricey for the builder, making purchases pricier for the buyer. According to industry estimates, the average price to develop a sq ft of space now stands at Rs 2,000. This means the buyer has to pay a price much higher than what the builder spends.

Discussed in detail in this article are the taxes one has to pay as GST on various building materials. 

Real Estate trends: Housing supply and demand set to grow this festival season

 In Mumbai Metropolitan Region (MMR) alone, consultants expect 2 million sq ft of launches in the coming festive months with 25-30 big launches planned.

The upcoming festive season is expected to spoil customers for choice in the residential real estate sector. After witnessing tepid launches momentum for several years and last year’s season getting hit by the pandemic, 2021 will see some big projects getting launched across the country.

As per Anarock Research, current trends suggest that there will be at least 30-40% growth in both new launches and sales in the ongoing quarter (July-September) as against the preceding one. As many as 24,600 units were sold across the top seven cities in Q2 2021, while 36,250 units were launched in the same quarter.

In Mumbai Metropolitan Region (MMR) alone, consultants expect 2 million sq ft of launches in the coming festive months with 25-30 big launches planned, having inventory worth Rs 3,750-odd crore. After a long hiatus, the good news is that branded developers are entering the market. Prestige Estates Projects is launching three projects in Mumbai’s Byculla, Mulund and Chembur neighbourhoods, another south-based developer Puravankara plans to launch two, while Oberoi Realty is understood to be launching a project in Thane. Sunteck Realty has also lined up launches in the existing Oshiwara District Centre and Naigaon projects.

Ritesh Mehta, senior director & head (residential services & developer initiatives), western India, JLL told FE that the launch pipeline is particularly looking strong in MMR because developers have taken advantage of government’s concession scheme under which if developers gave upfront amount for all the approvals needed for their projects, they got a 50% concession on the same.

“Last year, developers were selling at a cut-throat price and were undercutting their inventory. So, the money that has got accumulated as a result of higher sales, they have incurred on acquiring approvals for the new projects. This means we will see lot of launches this year,” he said. Also, since all the approvals have been acquired, from the customers’ perspective, the major thing is they would be relieved in terms of the certainty of the projects. Approval costs typically form 20-25% of the project cost, which came down to 12-13% as a result of the concessions.

Most of the launches are expected to be in the ticket size of Rs 1 crore to around Rs 2 crore, with preference for larger houses continuing and developers offering an extra half or one room catering to the new requirement for study or work purposes.

Anuj Puri, chairman, Anarock Group said, “With Covid-19 cases relatively under better control for now and the vaccination drive gaining more acceptable saturation, we anticipate housing demand and supply to see an uptick in the upcoming festive season. While some developers have already increased property prices on account of rising input costs and improved sales traction, many continue to offer deals and discounts”.

However, the element of direct price reduction has disappeared now; and offers and indirect discount being offered are to the tune of 1-3% of property value. Vivek Rathi, director (research) Knight Frank India said, “Most of the discounts now are in form of an extended stamp duty relief to assuage concerns of consumers who have missed the bus on the limited period stamp duty cut in markets like Mumbai and Pune”.

In a reversing trend, the negotiation power of buyers are now diminishing and the market is gradually turning to a sellers market. The discounts and freebies offered by developers will be dismal because they have incurred lot of money in acquiring approvals and land. “Both costs are already incurred and have covered the cash flows and thresholds of last year, so if Rs 10 was the quoted price and they were closing at Rs 7 last year, they are closing at `9 and nothing below that,” Mehta explained. However, the prices have not changed much yet.

Kamal Khetan, chairman and managing director, Sunteck Realty said that while the company is not announcing any discounts or price cuts, it would be launching phase-wise projects in the coming months.

Similarly, in NCR, developers are gearing for a good festive season. Saransh Trehan, director, Trehan Luxury Floors said, “We are launching 300 luxury independent floors at Sector 67 and few other locations in the heart of IT City Gurugram. We are also offering flexi-payment plan for prospective homebuyers. We expect a good response from customers. We are targeting to sell entire 300 units in the next few months riding on pent up and festive demand coupled with very low interest rate on home loan”.

Thane corporation gives nod to proposal for internal metro

The proposal for the internal metro was prepared and tabled in last week's general body meeting of TMC and approved unanimously.

The Thane Municipal Corporation (TMC) has decided to scrap the proposed Light Rail Transit system and instead build a conventional metro line as an internal transportation system for the city.

The proposal for the internal metro was prepared and tabled in last week’s general body meeting of TMC and approved unanimously.

Metro line 4 from Wadala to Kasarvadavli-Gaimukh, which is being constructed by the MMRDA, will connect Thane to Mumbai. The TMC, however, felt that it also needed an internal metro to connect various parts of the city to this metro line.

Subsequently, a DPR of the entire project was prepared by Mahometro. However, the central government instructed TMC to implement a Light Rail Transit (LRT) project as it would be more cost efficient.

The Maharashtra government stalled the LRT proposal, stating that in view of Thane’s burgeoning population, the metro would be a better transportation system as it could carry more passengers than an LRT. The state also said it would not be possible to integrate an LRT system with a metro system.

Based on the state directive, a proposal for the internal metro was prepared and presented in the general body meeting, where it was sanctioned unanimously. The cost of the project is Rs 10,000 crore.

The central and state governments will each provide 16.65 per cent of the funds for the internal metro project, and the remaining funds will have to be made available by TMC with low-interest loans.

MahaRERA sets up citizens' call centre to resolve queries of homebuyers

 The Maharashtra Real Estate Regulatory Authority (MahaRERA) has started a citizens’ call centre or helpdesk to resolve queries of homebuyers related to various services. The toll-free number 1800 2103770 and 022-69157100 will be operational from 7 am to 11 pm on all days, except Sundays and govemment holidays.

MahaRERA Secretary Vasant Prabhu said the helpdesk was initiated, as many citizens had expressed their inability to reach out to the authorities In the wake of the pandemic for various queries.

A team has been appointed to help citizens get their issues resolved by assisting them on how they should file their complaints online or check for the hearing dates or any other query regarding the registration of the project. “General information will be provided by the helpdesk. If there are citizens who want to understand more technical issues, a special technical team will help them,” explained Prabhu.

Ramesh Prabhu, Chairman of the Maharashtra Society Welfare Association, the move would help citizens not familiar with MahaRERA’s operations. “Many of our members have tried calling up the toll-free number and they have found it very effective. This is one of the best moves in the time of the pandemic. Citizens can contact the help desk and check the status of a project before investing in it.”

MahaRERA authorities said the helpdesk would also help people file complaints under guidance of staffers on call.

Manjunath Kakkalameli, an advocate practising in the High Court, told TOI that while virtual hearings were being conducted at the time of the pandemic, the helpdesk would assist the complainants.

Section (3) of the Real Estate (Regulation and Development) Act, 2016, mandates the authorities to operationalise a web-based online system for submitting applications for registration of projects.