Prior to July 2017, there were several taxes imposed on both the products and the services, making the taxation of goods and services complicated. But implementing the GST (Goods and Services Tax) has simplified the procedure by doing away with excise taxes, VAT, customs taxes, etc.
Like any other sector, the GST tax system has also been applied to the construction industry.
GST on construction has streamlined the tax code and absorbed a number of state and federal levies. Construction materials are taxed at rates ranging from 5% to 28%, depending on their classification under various tax brackets. Additionally, the government charges GST on construction contracts.
Several construction materials like cement, sand, tiles, bricks, and so on are used while constructing any building. Therefore, an appropriate taxation structure was implemented to govern the pricing of these items. Additionally, the HSN (Harmonised System of Nomenclature) Code segregates these building materials and other construction commodities into numerous chapters.
However, GST on building construction materials varies depending on the item used. Here’s a closer look at them.
GST on Sand: Chapter 26 of the HSN Code regulates all indigenous sands, except metal-bearing sands, regardless of colour and subject to a set 5% GST charge. Additionally, a GST rate on construction of 18% is applicable to all naturally occurring bitumen and asphalt, sands, asphaltites, bituminous oil shale and tar sands, and asphaltic rocks.
GST on Bricks : Bricks used as construction materials are subject to various GST rates that are mentioned below.
Building bricks and bricks made of siliceous rock or fossilised meals are subject to a 5% GST.
Fly ash and sand lime bricks are subject to a 12% GST.
Building bricks and blocks, as well as products made of cement, artificial stone, or concrete such as flagstones, tiles, and concrete bricks, are eligible for 28% GST.
Other than those made of siliceous fossil fragments or comparable silicate minerals rock, refractory bricks, blocks, tiles, and equivalent refractory ceramic construction goods are subject to an 18% GST.
Slabs, glass paving blocks, bricks, squares, tiles, and other pressed or moulded glass articles, glass cubes, and other glass smallwares (for mosaics or similar decorative purposes), leaded lights, panels, multicellular or foam glass in blocks, shells, or similar forms are subject to a 28% GST.
GST on Gravel and Crushed Stone: The GST rate on gravel, pebbles and different types of stones are as follows.
Pebbles, gravel, broken and crushed stones of the sort typically used as concrete aggregates for roads, railroad ballast, or other uses are subject to a 5% GST rate.
Other than these, limestone flux, limestone, and other calcareous stone of a sort needed to make lime or cement also fall under this category and are subject to a 5% GST.
GST on Marble and Granite Blocks: Blocks made of marble and granite are subject to a 12 % GST. However, other than blocks, granite, marble, and travertine are liable to a GST rate of 28%.
GST on Cement: GST on construction materials like all varieties of hydraulic cement, including portland cement, slag cement, aluminous cement, super sulphate cement, and similar cement, are entitled to a 28% GST.
GST on Iron and Steel: Construction materials made of iron such as blocks, wire, rolls, and rods are taxable to an 18% GST.
GST on Tiles: The GST rate on different types of tiles are as follows
Taxes on earthen or roofing tiles are 5%.
Plastic wall or ceiling coverings come in rolls or in the shape of tiles and are susceptible to a 28% GST.
Taxes on bamboo floor tiles are 18%.
The GST rate on construction materials is 28% for boards, panels, tiles, blocks, particles, chips, sawdust, and any wood debris that has been aggregated with cement, plaster, or other mineral binders.
Boards, panels, sheets, tiles, and other similar items made of plaster or composed of plaster are subject to a 28% GST.
The GST rate for concrete, cement, or synthetic stone tiles is 28%.
The GST rate is 28% for ceramic flooring blocks, support or filler tiles, and similar items.
Ceramic mosaic cubes, hearth or wall tiles, ceramic flags and paving, and finishing ceramics are subject to a 28% GST.
Glazed ceramic mosaic cubes, hearth, pavement, and wall tiles, as well as similar items, are subject to a 28% GST.
Apart from construction materials, Goods and Services Tax is also applicable on items used for interiors during building construction. Here’s a closer look at them.
1. Copper Wire: In accordance with Chapter 85 of the HSN Code, a GST of 28% will be charged on shielded wire and cable. It also covers electrical machinery and equipment, as well as their components and accessories, sound recorders and reproducers, television image and sound recorders and reproducers.
2. Wallpapers: Wallpapers that are used for interiors attract 28% GST.
3. Paint and Varnish: The GST rate on paints and varnishes made from synthetic polymers or naturally occurring polymers that have undergone chemical modification is 28%. Grafting putty, resin cement, glaziers' putty, caulking compounds, other mastics, painters' fills and non refractory surfacing preparations used for indoor walls, ceilings, floors, and other surfaces, are also subject to a 28% GST tax.
4. Interior Goods: Locks and padlocks are entitled to an 18% tax. The GST rate on base metal mountings, fittings, and similar items used for windows, doors, stairways, furniture, or blinds is 28%.
5. Bathroom Fittings: The GST rate on bathroom fittings are as follows
Sanitary fixtures including washbasins, ceramic sinks, wash basin pedestals, bathtubs, bidets, flushing cisterns, water closet pans, urinals, and similar items are subject to a 28% GST.
A GST charge of 28% is applied to iron and steel sanitary ware and components thereof.
The GST rate is 28% for conduits, ceramic pipes, pipe fittings, and guttering.
Fittings for tubes or pipes made of plastic, copper, aluminium, iron, nickel, or steel are subject to GST at a rate of 18%.
The new tax regime has created a huge impact on the construction sector. Following are a few highlighted points that you must be aware of.
For properties that are currently being built, the GST rate is 5% without the benefit of an Input Tax Credit (ITC).
The GST rate without ITC is one% for reasonably priced homes, defined as those with a price of lesser than Rs. 45 Lakhs.
Commercial real estate is subject to a 12% GST rate with ITC advantages.
Transportation of products carrying building material that includes the cost of gasoline will now be subject to a 12% GST.
The operators have the option of paying 5% GST without input tax credit (ITC) or 12% GST with ITC. The option to change will be offered at the start of the fiscal year.
In terms of India's tax history, the GST system marks a turning point. It has undoubtedly made the tax system simpler, but moving forward will require ongoing innovation and a cooperative approach.