GST rate changes drive up costs of civil projects in Chennai.
The cost of infrastructure projects, such as bridges, roads, and crematoriums, has started increasing in the city as the Goods and Services Tax (GST) rate has been increased for work contracts and sub-contracts.
Local authorities, such as the Greater Chennai Corporation (GCC), have started feeling the pinch as estimates for a number of projects have to be revised owing to the rate changes. For instance, the project cost for the Usman Road bridge in T. Nagar has increased from ₹131 crore to ₹164 crore owing to GST rate changes and rising cost of shifting of utilities, such as pipelines of the Chennai Metropolitan Water Supply and Sewerage Board (CMWSSB) and cables of the Tamil Nadu Generation and Distribution Corporation (Tangedco).
The GST rate for contracts involving pipeline work and the associated sub-contracts have been increased from 12% to 18%. The GST for contract involving earthwork and the associated sub-contracts have also been increased from 5% to 12%.
As the rate changes recommended by the 47th GST Council were made effective from July 18, 2022, the GST for work contracts for infrastructure projects were increased from 12% to 18%. A few months after former Finance Minister Palanivel Thiaga Rajan announced that ₹335 crore would be allocated for the work on three bridges in the city and after the GCC finished preparing estimates for them, the GST rates were revised. As a result, the original estimates were lower, and the civic body had to revise the estimates for such projects.
As Municipal Administration Minister K.N. Nehru has directed the civic body officials to speed up the redevelopment of the flyover on South Usman Road and CIT Nagar First Main Road, covering three junctions, work has gained momentum. The civic body has prefabricated composite girders at another site to fast-track the construction in the congested area.