GST Rationalisation: Lower tax on construction material would reduce construction cost by 3.5-4.5 pc: Report
Good news for India’s real estate sector! The GST Council has approved a major reduction in taxes on construction materials, which is set to lower overall building costs by about 3.5 to 4.5 percent. This move is expected to give a much-needed boost to the housing market and make homes more affordable.
One of the biggest benefits comes from lowering the GST on cement from 28% to 18%. Since cement accounts for nearly a quarter of raw material costs in construction, this reduction will save builders significant money and improve profit margins. These savings could be passed on to homebuyers, making buying a house more affordable.
Steel, another important construction material, remains taxed at 18%. However, GST on other key materials like marble, granite, travertine blocks, and sand lime bricks has been reduced from 12% to just 5%. This is good news for luxury and mid-range projects, where these materials are commonly used.
Overall, construction materials typically make up 50-60% of total building costs. The GST reduction on cement and other key inputs will help lower these expenses, leading to cheaper construction and more affordable homes.
The report from Crisil Intelligence estimates that cutting GST on cement alone will reduce total construction costs by around 3 to 3.5 percent. The lower GST on marble and granite could add another 0.5 to 1 percent savings.
Importantly, the GST rates for different types of property—such as affordable homes (1%), under-construction properties (5%), and completed homes (tax exemption)—remain unchanged. This means the government is keeping property taxes stable while giving a break to construction materials.
In short, this GST reform aims to support the real estate sector, improve developer margins, and help prospective homebuyers get better deals. With lower construction costs, we could see more housing projects, faster development, and more affordable homes across India.
