Gov’t announces 10% reduction on VAT for construction sector

By Linda Straker

AS of May 1, 2013, the cost of building a house is expected to be reduced as the Value Added Tax on materials for the construction of a house will be lowered to five per cent.

The reduction was among initiatives disclosed in the 2013 Budget, which was presented to the island’s Parliament on Tuesday by Prime Minister Dr. Keith Mitchell, who is also the Finance Minister. Described as a stimulation for the construction sector, the reduction will affect sand, cement, roofing materials, steel, lumber and construction blocks.

“Government will forego VAT on construction services for projects valued at less than EC$400 000 over the same period,” said Dr. Mitchell, who explained that the high price of sand will be reduced by 50 per cent.

“It will be no more than EC$60 per board; this is an attempt to drive down the cost of construction and home ownership,” he said.

Dr. Mitchell further explained that Government will modernise the Physical Planning Division to ensure efficient and timely approval of physical development plans, essential for the revival of the construction sector.

He said that several consultations across the major stakeholder groups urged support by the commercial banking sector and the credit union. In a free market, such as ours, the action of governments on banks and financial institutions is limited largely by moral suasion.

“We call on the banks to assist us in making this construction stimulus package a success by doing whatever it can to offer facilities which encourage new mortgages,” he urged.

He also announced a stimulus package for the manufacturing sector, which contributed about six per cent of Grenada’s Gross Domestic Product and employs about 4.5 per cent of the labour force. Effective May 1, 2013, Government will replace the manufacturers rebate with the Manufacturers Competitiveness Programme (MCP).

“The MCP will  compose of two parts. Part A is equivalent to five per cent of sales for qualified manufacturers and part B is equivalent to five per cent of sales and can only be used against accumulated rebate balances,” he explained.

The MCP will extend for a period of four years with annual reviews to ensure conformity.