Highway developers seek review of GST hike on construction

Leading highways developers in the country have written to the government on the Goods and Services Tax (GST) Council's decision to hike rate on works contract for roads, bridges to 18 per cent from 12 per cent.

Business Today TV has reviewed the letter sent by the National Highway Builders Federation (NHBF) to the Ministry of Finance, Ministry of Road Transport and Highways and the GST Council.

Sources further add that highway developers have requested the government to consider this critical issue and reduce the GST rate to 12 per cent for ongoing projects for bids submitted on or before July 18. This increase in GST rates will directly increase the cost of the existing projects by 6 per cent, a source said.
 
For upcoming projects which are bid out post July 18, the government may levy GST at 18 per cent, so that the companies can bid accordingly, the letter said

The 47th GST Council Meeting held last month had decided increase the rate of GST on works contract for roads to 18 per cent from June 18 this year. 

A higher GST rate of 18 per cent on road projects will become a root cause of a catastrophic impact on the liquidity of the companies, the letter states. Sources further add that highway developers are already reeling under stress due to unforeseen inflation in input cost and soaring finance cost.

In the Rs 111 lakh crore Pradhan Mantri Gati Shakti master plan for the construction of greenfield assets, the road infrastructure sector has already been allotted around Rs 20 lakh crore for capex by FY 2025.  The increase in GST on road construction, will lead to a stumbling block in achieving the above ambitious target, it further states.