The GST Council has agreed to raise GST on supply of bricks to 12% from 5% with input tax credit (ITC) from April 2022.
"Brick kilns would be brought under a special composition scheme with a threshold limit of Rs 20 lakh, with effect from April 1, 2022. Bricks would attract GST at the rate of 6% without input tax credit under the scheme. GST rate of 12% with ITC would otherwise apply to bricks," it said.
These decisions were taken at the GST Council meet on September 17 held in Lucknow.
Some taxation experts said that this may increase the cost of housing units.
“While increasing the GST rate on bricks from 5% to 12% appears to be a positive move for manufacturers and traders of bricks as it takes care of the inverted duty structure. It may increase the cost of the flat (finished product) in the hands of the end-user or buyers as the developer may not be able to take complete credit of the same,” Harpreet Singh, partner, Indirect Taxes, KPMG India.
As for the GST on brick kiln owners, capacity-based taxation may not be the right thing to do, especially during COVID-19 times as brick kiln owners may not be producing at the optimum level right now on account of various constraints pertaining to the pandemic, say some taxation experts.
However, Prashant Thakur, director and head - Research, ANAROCK Property Consultants said that the cost of housing may not be impacted instantly as property pricing is an extremely sensitive issue right now.
“This will benefit brick kiln owners, who are invariably small operators. The overall impact on the cost of bricks will not increase. Moreover, developers are aware that property pricing is extremely sensitive now and would not consider increasing them even if the impact had been detrimental. As such, cost of housing will not be impacted,” Thakur said.
"We feel that the housing prices will rise in the short-term specially in tier 3/4 towns due to lack of quality supply with the economy opening and more than nominal GST rates without input tax credit paid by developers. Most of the reputed and large developers in tier 1/2 cities are anyway using modern equipment like blocks for construction instead of bricks, hence it will not impact the sector significantly," said Harsh Vardhan Patodia, president, Credai National.