GST cripples 2BHK construction
The fate of construction of double bedroom houses in Bhadradri-Kothagudem, Mahabubabad, Khammam and Jayasankar-Bhupalpally districts for the homeless poor hangs in balance for want of clarity on whether the housing units are exempted from the Goods and Services Tax (GST) burden, amounting to Rs 1 lakh per unit.
Kothagudem: The fate of construction of double bedroom houses in Bhadradri-Kothagudem, Mahabubabad, Khammam and Jayasankar-Bhupalpally districts for the homeless poor hangs in balance for want of clarity on whether the housing units are exempted from the Goods and Services Tax (GST) burden, amounting to Rs 1 lakh per unit.
In the first phase, construction activity went off smoothly. In fact, a total of 4,115 units were sanctioned for the four districts. Because of the GST, the works have come to a grinding halt.
Under the limits of Integrated Tribal Development Authority, Bhadrachalam, a total of 6,940 housing units were sanctioned in two phases. Of the 6,940 sanctioned, 2,720 were allotted and of them, works related to 105 houses reached the final stage.
Following is the list of houses completed in the first phase in the four districts. The number of houses sanctioned has been shown in brackets: Bhadrachalm-Kothagudem-1,000 (1,318), Khammam-500 (1,000), Jayasankar-Bhupalpally district-70 (142) and Mahabubabad district-0 (160).
As the progress of Mahabubabad district was nil in the first phase, no houses were sanctioned in the second phase. In the second phase, Bhadradri-Kothagudem district was allotted 2,615, while Khammam district was allotted 1,000. Jayashankar-Bhupalpally district was allotted 300 units.
As per the State government’s order (GO No 10), the houses should have a plinth area of 560 square feet and the cost of each unit has been fixed at Rs 5.04 lakh. Earlier, the government used to collect Rs 25,000 towards VAT and Rs 5,000 towards cess.
With the enforcement of GST from July 1, 18 per cent is levied towards the GST, 1 per cent towards the labour cess and other taxes -1 per cent. In fact, 20 per cent of the unit cost would go to the Centre towards the taxes. Therefore, the contractor would have to build the house within the remaining budget of Rs 4 lakh per unit.
Therefore, the officials feel that it is not possible to adhere to the quality standards and build a house with 560 sq ft plinth area within the leftover budget.
The officials have proposed to the Centre to exempt the development works of various government departments from the purview of the GST or find an alternative method. As there was no reply from the Centre to the proposals, the housing activity has come to a standstill.