In an unprecedented decision, the GST Council has made a major change to the GST slabs, significantly reducing the rates on essential construction materials such as cement, bricks, and steel. With this unprecedented change, effective September 22nd, the GST on cement has been reduced from 28% to 18%, while the rate on bricks has been reduced from 12% to 5%! Learn how this historic reduction can reduce the total cost of building your house, with detailed examples and calculations.
Major Reduction in GST Slabs
The GST Council has taken the important decision to replace the current four slabs (5%, 12%, 18%, and 28%) with just two (5% and 18%). This simplification will greatly benefit the construction industry, making the dream of owning a home more accessible to the common man.
Significant Decline in the Prices of Key Construction Materials
This significant reduction in GST rates will have a direct and significant impact on the prices of various construction materials.
Impact on Cement Costs
The GST rate on cement has been reduced from 28% to 18%, resulting in a significant 10% reduction. Suppose a 50-kilogram bag of cement costs ₹400. A 10% GST reduction will result in a ₹40 reduction per bag. Similarly, if a bag costs ₹450, a ₹45 reduction will result. This small change translates into significant savings when purchasing large quantities of cement.
Significant Reduction in Brick Prices
The GST rate on bricks has been reduced from 12% to 5%, resulting in a significant 7% reduction. Suppose you purchase 100,000 bricks to build a house, and each brick costs ₹10. The total cost at the old rate would have been ₹10 lakh. After the 7% GST reduction, the total cost of bricks will be approximately ₹930,000. This means you’ll pay ₹70,000 less on an order of 100,000 bricks.
Impact on Steel and Tiles
The GST rate on steel products has been reduced from 28% to 18%, resulting in a 10% reduction. For example, the price of 1 quintal of iron rods is ₹5,000. A 10% reduction will result in a ₹500 reduction per quintal.
Similarly, the GST on items like tiles has been reduced from 12% to 5%, resulting in a 7% reduction. Now, tiles that cost ₹100 per square foot will cost ₹7 less, significantly reducing the overall cost of tiling.
Actual cost savings for a 2,500-square-foot house
Let’s use an example to understand the total savings that can be realized when building a 2,500-square-foot 4BHK house. Estimates suggest that approximately 1,000 bags of cement, 25,000 bricks, 10 tons of rebar, and 2,200 square feet of tiles may be used to build a 2,500-square-foot house.
Total cost at old GST rates
1,000 bags of cement (₹400 per bag): ₹4 lakh
25,000 bricks (₹10 per brick): ₹2.5 lakh
10 tons of rebar (₹50,000 per ton): ₹5 lakh
2,200 square feet of tile (₹100 per square foot): ₹2.2 lakh
Total estimated cost: ₹13.7 lakh
Total cost at new GST rates
1,000 bags of cement (₹360 per bag): ₹3.6 lakh
25,000 bricks (₹9.3 per brick): ₹2.32 lakh
10 tons of rebar (₹45,000 per ton): ₹4.5 lakh Thousand
2200 square feet of tiles (₹93 per square foot): ₹2 lakh 4 thousand 6 hundred
Total estimated cost: ₹12 lakh 47 thousand 1 hundred
According to this, building a 2,500 square foot house will result in a direct and significant savings of ₹1,22,900. This historic decision will not only reduce construction costs but will also provide a significant boost to the country’s economy.