The Central government plans two GST tax rates. These will be 5% and 18%. This change replaces the current tax system. The new system starts by Diwali. Essential foods now have zero GST. Daily items use a 5% rate. Standard goods are taxed at 12%. Electronics and services get 18%. Luxury and “sin” goods face 28%. The new plan uses two rates. It also adds a 40% special rate. This is for luxury and “sin” items.
Prime Minister Narendra Modi spoke on Independence Day. He promised new GST reforms. This would be a Diwali gift. Construction materials have varied GST rates. Cement is 28%. Steel is 18%. Paints and varnishes are 28%. Ceramic tiles are 18%. Sanitary ware is also 18%. Design and management services cost 18%. These rates affect building costs. They also influence home prices.
Under-construction homes have a 5% GST. Affordable housing is 1%. Ready-to-move homes need no GST. This is with an occupancy certificate. The new GST plan uses 5% or 18% rates. Most goods and services fit these. This replaces 5%, 12%, 18%, and 28% rates. Experts wonder if savings will reach buyers. They question developer profit motives.
Lowering GST on new homes helps buyers. It makes housing more affordable. This boosts the real estate market. Easier GST compliance aids developers. Input costs are also managed better. This improves cash flow. Home prices may then fall.
Real estate GST uses many rates. Affordable homes have 1% GST. They get no input tax credit. Other homes have 5% GST. Affordable housing is defined by size. It can be up to 90 sq. m. Its price cannot exceed ₹45 lakh.
Consider cement costs. Cement is a key building material. If GST on cement drops from 28% to 18%, costs will fall.
Financial experts believe tax cuts help. A 10%–20% tax reduction aids affordability. The main question remains. Will developers pass on these savings?