ST GEORGE’S, Grenada (GIS) — The Grenada government will provide further stimulus to the local construction sector by reducing the value added tax on a number of construction items to 5% with effect from May 1, 2013, to December 31, 2014.
This was one of the major announcements by Finance Minister Dr Keith Mitchell during his presentation of a $1,102,243,994 fiscal package on Tuesday.
He also made mention of the fact that the government has begun, but not yet completed a review of the VAT system.
Mitchell announced that the reduction of VAT will be on sand, cement, roofing materials, steel, lumber and construction blocks.
He added that the government will forego VAT on construction material for projects valued less than $400,000 over the same period.
The minister of finance said that the government is engaged in efforts to reduce the high cost of sand from $120 per load to no more than $60 per load; a 50% reduction in an attempt to lower the cost of construction, and encourage more homeownership in Grenada.
Mitchell said the aim is to deliver meaningful reduction in the cost of construction, stimulate construction employment and economic activity.
“To achieve this, Mr Speaker, greater efficiency will be required in the regulatory systems. In this regard, government will modernize the Physical Planning Division to ensure efficient and timely approval of physical development plans, essential for the revival of the construction sector,” Mitchell said.
The finance minister called on the banks to assist government in making this construction stimulus package a success, by doing whatever it can to offer facilities to encourage new mortgages.
He said, consultations across the major stakeholder groups urged support by the commercial banking sector and the credit unions.
Concerns of the private sector relating to the current VAT regime were also addressed in the 2013 Budget.
The private sector raised the concern that the current VAT regime discriminates against local purchases. (They argued) that when a concession is granted, and the VAT is waived on imports, they cannot use that concession to get a VAT waiver on the same item, if purchased locally.
Mitchell said this obviously discourages domestic economic activity, and hurts job creation. He added that the government will soon pass the necessary amendments to the VAT Act.
“Our government has heard the loud cries of the private sector on this vexing issue and has agreed that it would be best for economic activity and growth if government allows VAT concessions to be enjoyed equally when the product is sourced locally, and when it is imported,” the prime minister said.
In the same light, it was announced that voluntary registration for VAT by small businesses will take effect from January 2014.
The finance minister said government will mandate the Inland Revenue Department to develop the necessary guidelines and regulations.