Goods and Services Tax (GST) has reshaped the construction industry, influencing services and materials alike. This article delves into the GST rates on construction services and materials, recent updates, and their impact on builders, contractors, and suppliers. Whether you’re involved in residential or commercial projects,
Applicability of GST on Construction
GST is applicable to construction activities in India, whether it is private construction, commercial construction, or construction of flats/society. In other words, any property under construction which is intended for sale is considered a supply of service and, therefore, liable for GST. The ready-for-sale properties do not attract any GST. GST is only payable on under-construction properties. However, the applicability of GST on construction work depends on various factors such as the type of construction, the nature of the transaction, and the status of the parties involved in the transaction.As per para (5b) of Schedule II of the CGST Act, supply of services is defined as the construction of a complex, building, civil structure, or a part of it, which is meant for sale wholly or in part. However, if full consideration is received after the issuance of the certificate of completion, it is not considered a supply of services and is exempt from GST.
GST on Construction Services
The GST rate for construction services is generally 18%. However, there are key exceptions like affordable housing projects are taxed at a reduced rate of 1%, certain infrastructure projects like roads and bridges are taxed at 5%, and works contract services, where the contractor supplies materials, are taxed at 12%.
GST Rate on Construction Services in 2025 with HSN Code
Types of Construction Services | GST Rate | HSN Code |
| Construction of residential complexes | 12% (after 1/3rd land deduction) | 9954 |
| Works contract for government, local authority, or governmental authority | 12% | 9954 |
| Affordable housing projects (w.e.f April 1, 2019) | 1% without ITC | 9954 |
| Construction of commercial complexes | 18% | 9954 |
| Completion and finishing services (e.g., painting, tiling) | 18% | 9954 |
| Composite supply of works contract (Value of goods is less than 25%) | 18% | 9954 |
| Composite supply of works contract (Value of goods is more than 25%) | 12% | 9954 |
| Construction services for highways, roads, railways, bridges, airport runways, and tunnels. | 18% | 995421 |
| Masonry services | 18% | 995456 |
GST on Construction Materials in 2025
Types of Construction Materials | GST Rate |
| Sand | Natural Sand – 5%
Oil shale/bituminous, asphalt, asphaltic rocks, natural, tar sand, – 18% |
| Crushed Stones, Pebbles, Gravel | 5% |
| Building Stones | 5% |
| Coal | 5% |
| Brick | 5% – 28% |
| Tiles | 5% – 28% |
| Mica | 12% |
| Granite and Marble – Blocks | 12% |
| Granite and Marble – Not in Blocks | 28% |
| Steel and Iron | 18% |
| Oil Shale, Bituminous Rocks, Natural Asphalt, Tar Sand | 18% |
| Pipes and Tubes, Fittings | 18% |
| Cement | 28% |
| Wallpaper | 28% |
| Varnish and Paint | 28% |
| Electrical Appliances | 28% |
| Bathroom Interiors and Appliances | Pipes and tubes, fitting- 18%
Other items- 28% |
| Other Items | 28% |
GST Exemptions and Concessions
- Affordable Housing: A reduced GST rate of 1% is applicable to affordable housing projects. These are defined as residential properties with a carpet area of up to 60 square meters in metropolitan cities and up to 90 square meters in non-metropolitan cities, valued at Rs. 45 lakhs or less.
- Exemptions: GST is not applicable on property resales, transactions involving completed residential properties, and the buying or selling of land. Additionally, construction services or enhancements provided through pure labor contracts under the Pradhan Mantri Awas Yojana (PMAY) are exempt from GST.
- Pure Labor Contracts: GST is also exempt on construction services provided through pure labor contracts for a single residential unit or within a residential complex.
- e-Way Bills: The transportation of construction materials like cement and steel requires an e-Way bill only when the consignment value exceeds Rs. 50,000.
FAQs
What is the current GST rate on construction services?
The current GST rate on most construction services is 18%, but it can be lower (e.g., 1% for affordable housing).
What is the GST rate for an under-construction flat?
The GST rate for an under-construction flat is typically 12%, but it can be reduced to 1% for affordable housing.