The much-vaunted Goods and Services Tax (GST), rolled out amidst fanfare on July 1, has made construction work costlier because the end user has to pay 18 per cent GST on every purchase of material like sand, chips or other construction materials. Even electric wire, which was being sold @ five per cent VAT, has become costlier because 28 per cent GST has been imposed on it. With this real estate sector has been affected considerably by the new system.
Talking to The Pioneer a shopkeeper in Dehradun said that earlier wire was cheaper but now there is 28 per cent GST on it. If you buy wire worth Rs 1000 then you will have to pay Rs 280 as GST on it. Due to this reason it has become costlier. As is known, every person who builds a house also buys electric wire, which are being used to facilitate various electricity powered appliances like lights, fan, gyser, air conditioner, room heater, immersion rod and other mechanisms, but the government has kept this material on the list of luxury items. Due to this reason highest slab ie 28 per cent is being collected on its purchase.
Similarly if one buys construction material then one will have to pay 18 per cent GST. As is commonly known, in order to build a house, three things – sand-chips, iron rods and bricks are essential for the construction. Now, the sellers might not have been paying tax to the government but they have been charging from the customers and builders too. There is confusion on this subject because even if a builder sells his final product -- a house/building then whatever the profit he would have to pay 18 per cent GST on the difference between construction cost and selling cost. It will also be recalled that all citizens have to pay income tax too if they earn more than Rs two lakh per annum individually. Now builders question the need to pay income tax if they are already paying GST on difference between cost and selling price.
The Government has also imposed GST on wood used in construction. It is common knowledge that people have to buy wood for construction of doors, windows and other aspects of a home. 0
On this the Government has imposed 18 per cent GST whereas it was mere 12 per cent when the VAT system was in place. Talking to The Pioneer, a builder who is also a leader of the Bharatiya Janata Party, says that earlier the builders were paying mere 12 per cent VAT but now they have to pay 18 per cent tax.
He opined, “Being businessmen we can’t afford such tax so we have to pass it to the customers.” It should be mentioned here that the government is motivating people to build their own home for which the government would also give financial aid to them. But once they start constructing house then they would come across GST, which has become a sort of a problem for both the customers and sellers.
Even glass has become costlier due to the introduction of GST. like the other materials commonly used in construction of buildings, glass is also bought for windows and other aspects. As per the GST norms, the businessmen who are having a turnover of more than Rs 10 lakh will have to get registered under the GST regime. As one seldom find’s a builder who does not have turnover of more than Rs 10 lakh it means that they will have to register themselves. Traders thus registered must file three returns per month which means 36 returns per year after three months since the rollout that is from October. This warrants that they must maintain ledgers on a daily basis.
Earlier, the system was that they filed their returns on a quarterly basis, something that helped them to conveniently alter their sale/purchase registers. Now, the option being closed, they would have to employ accountants to maintain the accounts.