GST Construction Works
5% · 18% Tiers

WORKS CONTRACT GST, on the GST 2.0 structure effective 22 September 2025: (1) RESIDENTIAL UNDER-CONSTRUCTION: 5% (no ITC) / 1% (affordable) — UNCHANGED by the reform. (2) COMMERCIAL works contract: 18% with ITC — unchanged. (3) GOVERNMENT INFRASTRUCTURE works contract: 18%. (4) METRO + RAILWAY + HIGHWAY: 18%. (5) PURE LABOR contract: 18%. (6) ROAD MAINTENANCE: 18%. (7) RENEWABLE ENERGY (solar/wind) devices and parts: 5% (cut from 12%); the service leg of an EPC contract stays 18%. (8) AFFORDABLE HOUSING projects: 1%. THE BIG CHANGE: there is no longer ANY 12% construction-service rate.

The last three concessional entries — works contract predominantly earth work (over 75% of value) supplied to Government, the sub-contractor leg of that, and offshore oil & gas works contract — all moved from 12% to 18% on 22 September 2025 when the 12% slab was abolished. Source: GST Council 56th meeting, Annexure IV (Construction Sector); Notification 15/2025-Central Tax (Rate), serial 3.

BUILDER + BUYER: (1) UNDER-CONSTRUCTION: 5%/1% GST charged on agreement value. Buyer pays. (2) READY POSSESSION (OC received): ZERO GST. (3) BUILDER input GST: cement 18% (cut from 28% on 22 September 2025), steel 18%, paint 18%, sand lime bricks 5% (cut from 12%).

POST-APRIL 2019: builders LOST ITC for residential (5% no ITC) — so for residential projects the cement cut is a REAL cost saving, not a credit they were reclaiming anyway. (4) COMMERCIAL builders: retain ITC, so the cement cut is cash-flow rather than margin. STRATEGIC: ready possession purchases save ₹5-10L on a ₹1cr property.

Source: GST Council 56th meeting, Annexure (Construction Sector) — cement 28% to 18%.

GOVERNMENT INFRA GST (all 18% from 22 September 2025): (1) METRO + RAILWAY construction: 18%. (2) HIGHWAYS + ROADS: 18%. (3) WATER + SANITATION projects: 18%. (4) AIRPORT TERMINAL: 18%. (5) DEFENCE projects: 18%. (6) BUILDING for govt use: 18%. (7) EARTHWORK-HEAVY contracts (earth work over 75% of contract value) supplied to Government: 18% — this was the last 12% entry standing and it went to 18% with the abolition of the 12% slab. (8) SUB-CONTRACTOR supplying to the main contractor on such a job: 18% as well. (9) SOLAR/WIND: the devices and parts are 5% (down from 12%); the works-contract service leg is 18%. CONTRACTORS pay 18% and claim ITC on inputs.

Government as recipient — RCM may apply. STRATEGIC: re-price any government tender quoted on the old 12% assumption — the 6-point jump is not absorbable at typical infra margins.

Source: Notification 15/2025-Central Tax (Rate), serial 3 items (vii), (viii) and (x).

PURE LABOR CONTRACTS: 18% GST. NO MATERIALS — only labor service.

EXAMPLES: (1) MASONRY workers. (2) PLUMBING service. (3) ELECTRICAL service. (4) PAINTING service (labor only). (5) AC INSTALLATION (labor). (6) HOUSEKEEPING + maintenance. WORKS CONTRACT: includes materials + labor.

Rate per project type — now 5% or 18% only, since the 12% slab was abolished on 22 September 2025. DIFFERENTIATION CRITICAL for GST registration + filing.

CONSTRUCTION GST STRATEGY: (1) BUYERS: ready possession ZERO GST. Under-construction 5%/1%. (2) AFFORDABLE bracket 1% — major saver. (3) BUILDERS: ITC restrictions post-2019 — factor in cost. (4) COMMERCIAL builders retain ITC — model accordingly. (5) GOVT INFRA: 18% standard from 22 September 2025 (was 12%) — repricing factor on every open tender. (6) WORKS CONTRACT vs PURE LABOR: classify correctly. (7) e-INVOICING > ₹5cr turnover. (8) RCM applicable for govt + specified recipients. (9) AFFORDABLE definition: ≤60sqm metro + ≤₹45L. (10) ENGAGE construction-specialist GST CA for clean compliance.