The GST on building materials is back in the spotlight. Real estate developers across India have urged the government to cap GST at 18% for essential inputs like cement, steel, and tiles. Their demand aims to bring down the high cost of housing and support affordable home buyers.
Let’s break down what this means, where the current GST rates stand, and the legal-economic implications for builders and buyers.
Why the Real Estate Industry Is Pushing for a Cap
- Input costs have surged due to high GST on materials like cement (28%).
- No input tax credit (ITC) is available for residential real estate under affordable housing schemes.
- Developers say the cascading tax effect is hurting pricing and buyer demand.
- A reduction could revive the sector, which is still recovering post-COVID and facing inflation-driven margin pressures.
Current GST Rates on Key Building Materials
| Material | Current GST Rate |
|---|---|
| Cement | 28% |
| Steel | 18% |
| Marble/Granite | 28% |
| Tiles | 28% |
| Paints/Putty | 28% |
| Sand/Lime | 5% |
| Bricks (non-clay) | 12% |
Note: As per CBIC’s Notification No. 1/2017-CT (Rate) and subsequent rate rationalisations
Legal and Policy Perspective
- No ITC for residential projects (post 1 April 2019) as per CBIC Notification No. 03/2019-CT (Rate).
- Input tax costs add directly to project cost, making flats expensive for end buyers.
- Section 171 of CGST Act (anti-profiteering) restricts passing on cost escalations.
- Builders are caught between fixed sale prices and rising tax-heavy input costs.
How an 18% Cap Can Help
- Lower construction cost → cheaper homes
- Boost to affordable housing segment
- Level playing field across sectors (many industrial inputs capped at 18%)
- Reduces tax arbitrage and encourages more compliant billing
Expert View: Why Rationalisation Is Due
“Real estate bears 28% GST on cement but cannot claim ITC on residential supply. This dual burden not only violates the principle of seamless credit but also makes housing less accessible. A cap at 18% is both economically sound and GST-compliant.”
— CA Tarun Bajaj, Indirect Tax Consultant
What Developers and Homebuyers Can Do
- Track GST Council Meetings: Next meeting may include this rate revision.
- Raise representations via CREDAI, NAREDCO or local RERA bodies.
- Document input costs for internal project planning and pricing.
- Opt for commercial real estate projects (where ITC is still available) if feasible.
Will GST Council Act on This?
The 53rd GST Council Meeting (June 2024) focused on trade facilitation, but real estate input GST didn’t feature. However, with the next pre-Budget Council meet due, industry lobbying is at its peak. States like Maharashtra and Tamil Nadu have informally supported rationalisation in prior meetings.
Watch for developments in the next CBIC rate notifications.
FAQs on GST on Building Materials
Q1. Is GST on cement refundable for builders?
No, ITC on cement is blocked for residential projects under the new 5% or 1% GST rates (without ITC).
Q2. Can GST on building materials be passed to buyers?
Technically yes, but anti-profiteering rules under Section 171 restrict unjustified price hikes.
Q3. Is there GST on labour charges in construction?
Yes. Composite construction contracts attract 18% GST. Labour-only supply (pure labour) may be exempt under specific conditions.
Summary
GST on building materials like cement and tiles is 28%, raising construction costs. Real estate bodies have urged the government to cap it at 18% to revive affordable housing and reduce project burdens, especially since input tax credit is unavailable.
Final Thoughts
The call to cap GST on building materials at 18% is more than an industry ask — it’s a policy nudge to revive housing affordability in India. If you’re a builder or buyer navigating GST complexity, Efiletax can guide you on compliance, invoicing, and project-level GST strategy.