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Government Material Construction Tax (GST) on building materials should be confined to a rate of 18%, as suggested by NAREDCO President.

G. Hari Babu, President of the National Real Estate Development Council (NAREDCO), advocates for the government to categorize taxes on building materials under the 18% bracket for Goods and Services Tax.

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Government Construction Material Tax Should Be Capped at 18% According to NAREDCO's President
Government Construction Material Tax Should Be Capped at 18% According to NAREDCO's President

Government Material Construction Tax (GST) on building materials should be confined to a rate of 18%, as suggested by NAREDCO President.

News Article: NAREDCO Delhi Pushes for Sustainable Real Estate Practices and GST Reforms

In the heart of India's capital, the National Real Estate Development Council (NAREDCO) is leading a charge towards a greener and more sustainable future for the city's real estate sector.

Harsh Vardhan Bansal, the President of NAREDCO Delhi, is spearheading this initiative. His focus is on ensuring that housing, commercial development, and urban services in Delhi move towards sustainability. Bansal's long-term vision is to build a future-ready, climate-conscious capital city.

NAREDCO Delhi is actively engaging with policymakers and urban planners, advocating for incentives that reward eco-friendly practices and penalize shortsighted developments. One such incentive is an increase in the Input Tax Credit (ITC) limit for affordable housing from 45 lakh to 60 lakh.

The demand for ITC extends beyond affordable housing. G Hari Babu, the President of NAREDCO, has urged the government to bring the Goods and Services Tax (GST) rates of building materials down to 18%. Currently, various materials attract GST rates up to 28%, which significantly impacts the construction and real estate industry. Babu also requested a reduction in the GST rate on cement, currently at 28%, to 18%.

Babu's statements, along with Bansal's, highlight the need for incentives that reward eco-friendly practices and penalties for shortsighted developments in the real estate sector.

The capital's real estate sector faces high infrastructure demand and real land and environmental constraints. Bansal has urged industry members and developers to come up with Public-Private Partnership (PPP) models for developing state-of-the-art hospitals, schools, shopping malls, accommodations, and infrastructure.

Delhi Chief Minister Rekha Gupta has assured the industry members that the government needs two years to revamp Delhi and fill the bottleneck of the past 10 years of developmental backlog.

A significant legal development came from the Supreme Court in October 2024, clarifying that ITC can be claimed on construction related to rental services (leasing) for commercial purposes. The Court ruled that construction of buildings essential for commercial leasing could qualify as a "plant" under Section 17(5)(d) of the CGST Act, thus legally supporting the industry's demand for ITC on commercial leasing assets.

As of August 2025, these demands and clarifications remain demands and clarifications rather than finalized government policy changes. However, with institutional backing from NAREDCO, recent legal clarification supportive of ITC claims on leased commercial properties, and an active push for GST rate rationalization on building materials, the industry's demand is well-advanced.

[1] NAREDCO's 17th National Convention: https://www.naredco.in/news-events/naredco-17th-national-convention [2] Supreme Court Clarification on ITC for Commercial Leasing: https://www.taxmann.com/articles/supreme-court-clarifies-that-itc-can-be-claimed-on-construction-related-to-rental-services-for-commercial-purposes/ [3] NAREDCO's Demand for GST Rate Rationalization: https://www.naredco.in/news-events/naredco-demands-gst-rate-rationalization-on-building-materials-to-reduce-costs-on-construction-inputs [5] NAREDCO's Demand for ITC on Commercial Assets Constructed for Leasing Purposes: https://www.naredco.in/news-events/naredco-urges-the-government-to-bring-the-goods-and-services-tax-rates-of-building-materials-to-18-percent-to-reduce-costs-on-construction-inputs

  1. The President of NAREDCO Delhi, Harsh Vardhan Bansal, is advocating for incentives such as an increase in the Input Tax Credit (ITC) limit for affordable housing to 60 lakh, which could encourage sustainable real estate practices.
  2. G Hari Babu, the President of NAREDCO, has also urged the government to bring down GST rates for building materials to 18%, aiming to reduce costs on construction inputs and promote a greener real estate sector.
  3. The Supreme Court clarified in October 2024 that ITC could be claimed on construction related to rental services (leasing) for commercial purposes, providing legal support for the industry's demand for ITC on leased commercial properties.
  4. NAREDCO is pushing for GST reforms, specifically the reduction of GST rates on building materials and cement, to lower costs in the real estate sector and create a more favorable environment for investing in sustainable real estate practices.

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