The government’s proposal to introduce just two Goods and Services Tax (GST) slabs — 5% and 18% — could ease compliance and lower construction costs, but whether homebuyers actually see price reductions will depend on how developers respond, say industry experts.

Currently, GST rates vary from 5% on essential items to 28% on luxury and sin goods. Construction materials also face different rates — cement at 28%, steel at 18%, paints at 28%, tiles at 18% and sanitary ware at 18%. Services such as architectural design and project management are taxed at 18%. These costs directly feed into housing prices.

Under-construction homes presently attract 5% GST (1% for affordable housing), while ready-to-move properties with an occupancy certificate are exempt. The proposed structure will merge the 12% and 28% slabs into the two main brackets of 5% and 18%, with a special 40% rate for luxury and sin goods.

Developers believe this could be a positive step.

• Vikas Bhasin, MD of Saya Group, said that lower GST on construction materials could make homes more affordable and improve sentiment in the housing market.
• Pradeep Aggarwal, chairman of Signature Global (India), noted that a simplified two-slab structure would ease compliance, rationalise input costs and improve cash flows for developers, which may eventually reduce home prices.

If the tax on cement, for example, drops from 28% to 18%, developers could save significantly on project costs. However, some financial experts caution that not all benefits may reach buyers. Abhishek Kumar, founder of SahajMoney, said developers might retain part of the savings to protect margins.

Affordable housing, which currently enjoys concessional GST rates, could benefit further if the new structure continues the same treatment. In contrast, luxury housing could become costlier if high-end fittings fall into the 40% luxury tax bracket.

Beyond prices, experts say the reforms could push the real estate sector towards greater transparency. B. Srinivasan, founder of Shree Sidvin Investment Advisors, believes a 10–20% cut in overall taxation would not only make homes more affordable but also reduce cash transactions and increase compliance.

The government plans to roll out the revamped GST regime by Diwali, as part of its next-generation tax reforms announced by Prime Minister Narendra Modi on Independence Day.

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