Will the GST Rate Cuts Lower Costs for Homebuyers?

The 56th GST Council meeting introduced a series of reforms under what is being called GST 2.0.

- JAYASHREE PARTHASARATHY

The changes focus on three main priorities: offering some relief to consumers, supporting labour-intensive sectors, and aligning policy with broader national interests.

The Council's measures are intended to simplify the indirect tax structure, make compliance less cumbersome, and improve the overall ease of doing business. They emphasise rationalising GST rates across goods and services.

Standalone homebuyers: Immediate gains

For individuals constructing standalone homes, the impact of the rate cuts is both significant and imminent. While the labour component of construction contracts has always been exempt from GST, the reduction in GST on cement from 28% to 18% is a game-changer. Cement typically accounts for 20% of total construction costs, and this rate cut could translate into a 2% overall savings for the common man.

Further, materials like sand-lime bricks and wood-based products have seen their GST rates drop from 12% to 5%, which together represent another 5-10% of construction costs. These further offer meaningful cost optimisation opportunities.