Effective implementation and increased infrastructure spends will boost building materials industry

Effective implementation and increased infrastructure spends will boost building materials industry
03/07/2019 , by , in EXPERT ZONE

Authored by Ashwin Reddy, Managing Director, Aparna Enterprises Ltd.

The building material industry is a significant part of construction industry, which is the second largest employer in India and it accounts for around 7- 8% of India’s GDP. The key agenda of the budget should be to draw fiscal measures and policies that will help the industry maintain its growth momentum. Some of the key areas that the budget should implement are

Increase the budgetary allocation for infrastructure development- Apart from creating a conducive tax regime, to push the building materials industry in the growth trajectory will require the government to continue its thrust on infrastructure development. The government should ear mark more funds to improve the infrastructure of the country as infrastructure development is crucial for the growth of the economy as well as the building materials industry. The government should increase the spends on building smart cities, road and railway network, port and airport development, solar park development, strengthening of logistics and warehousing segment, affordable housing launches and metro rail network expansion. These initiatives will have a direct positive impact on the building material industry.

Rationalization of GST- One of the areas that needs immediate intervention is the GST rates. The government should rationalise the GST rates for several components in building material industry. The upcoming budget should look at bringing down the GST rates of some of the essentials and raw materials from the current 28% to 18%. The reduction will help the building material industry to bring down the cost of the products and thereby improve consumption.

Bring Natural gas under GST regime – Currently, Petroleum and Natural Gas are taxed under VAT. Extending GST to the natural gas will reduce the cost of tile production and thereby positively impact the overall price of tiles in India. The prices of the end product will come down by 10%. Apart from building material industry, implementation of GST for natural gas will aid the logistics sector which plays a vital role in the growth of the building material industry.

Single window clearance- The budget should also pave the path for ease of doing business. Currently business establishments need to get approvals from multiple departments delaying the process of clearance. Introduction of a single window clearance mechanism can help in fastening the approvals as well as reduce redtapism.

Set up a mechanism to monitor the timely execution and dispersal of funds – The government should encourage and ensure greater participation from private players. They should address concerns related to regulatory uncertainties as well as the time and cost overruns. This will call for setting up a comprehensive mechanism that monitors the progress and accordingly disperses the funds.

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