GST Rate Hikes affect Infrastructure Project Estimates in Chennai Corporation

In recent developments, the city of Chennai is witnessing a surge in the costs of vital infrastructure projects, including bridges, roads, and crematoriums. This financial strain on local authorities, exemplified by the Greater Chennai Corporation ( GCC ), stems from the increased Goods and Services Tax ( GST ) rates applicable to both work contracts and sub-contracts.

Local projects, such as the Usman Road bridge in T. Nagar, are grappling with revised estimates, with the project cost soaring from ₹131 crore to ₹164 crore. Factors contributing to this increase include adjustments in GST rates and escalating expenses related to the relocation of utilities like pipelines from the Chennai Metropolitan Water Supply and Sewerage Board ( CMWSSB ) and cables from the Tamil Nadu Generation and Distribution Corporation ( Tangedco ).

The GST rate for contracts involving pipeline work and associated sub-contracts has surged from 12% to 18%, while contracts involving earthwork and related sub-contracts now incur a GST of 12%, up from 5%.

These changes, implemented from July 18, 2022, following recommendations from the 47th GST Council, have had a significant impact on work contracts for infrastructure projects. Notably, this shift comes months after former Finance Minister Palanivel Thiaga Rajan allocated ₹335 crore for three city bridges, and the GCC finalized estimates for these projects.

Municipal Administration Minister K.N. Nehru has urged swift progress on the redevelopment of the flyover on South Usman Road and CIT Nagar First Main Road, spanning three junctions. To expedite construction in the congested area, the civic body has taken the initiative to prefabricate composite girders at an alternate site.