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GST Rates

GST Rate on Construction Services 2026 — Works Contract, Residential & Commercial

GST on construction services depends on the type of project — affordable housing, regular residential, commercial, or government works contracts. Getting the rate wrong leads to compliance issues and ITC rejection. This guide covers all construction GST rates with SAC codes and real invoice examples.

By Arjun Sharma · GST & Tax Compliance Specialist Reviewed for GST accuracy
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GST Rates for Construction Services

Construction Type SAC Code GST Rate
Affordable housing (under PMAY) 9954 1% (no ITC)
Residential apartments (first sale) 9954 5% (no ITC)
Commercial buildings (first sale) 9954 12% (no ITC)
Works contract — government projects 9954 12%
Works contract — private commercial 9954 18%
Pure labour services — construction 9954 18%

Works Contract vs Construction Service

A works contract combines supply of goods and services for immovable property. Key rules: (1) Works contracts for the central/state government attract 12% GST. (2) Works contracts for private commercial projects attract 18%. (3) Sub-contractors providing works contract to the main contractor also charge 12% or 18% depending on the end recipient. (4) ITC on works contract inputs (cement, steel) is blocked for the builder — only the construction service output GST can be adjusted. Example: A contractor builds a government hospital (SAC 9954) and invoices ₹50,00,000. GST at 12% = ₹6,00,000. Total invoice: ₹56,00,000.

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FAQs

What is GST on under-construction property?

Under-construction flats sold before completion attract 5% GST (12% for commercial). Completed and ready-to-move properties have no GST — only stamp duty applies.

Can a construction contractor claim ITC?

ITC on construction inputs (cement, steel, sand) is blocked under Section 17(5) for builders. However, contractors providing pure services can claim ITC on service inputs.

What SAC code should a civil contractor use?

SAC 9954 covers all construction of buildings and civil engineering works. Sub-categories: 99541 (residential), 99542 (commercial), 99543 (civil engineering like roads).

Is GST applicable on land purchase?

No. Land purchase is exempt from GST. GST applies only on the construction component. For under-construction flats, GST is on two-thirds of the total value (one-third is deemed land value).

Why Businesses Stop Using Excel for GST Invoices

Manual GST calculation mistakes

One wrong CGST/SGST split or a misapplied rate triggers notices and ITC denial for your buyer.

Slow invoice creation

Copying last month's Excel file, updating dates, recalculating — 20 minutes for what should take 30 seconds.

Formatting breaks on every device

Excel invoices look different on every printer and PDF converter. Clients complain about unreadable layouts.

No easy sharing or payment link

Sending PDFs over WhatsApp with no way for clients to pay directly slows down collections.

Incorrect tax type (IGST vs CGST+SGST)

Excel can't auto-detect intra vs inter-state supply. Wrong tax type = ITC rejected for your buyer.

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Disclaimer: The information in this article is for general informational purposes only and does not constitute professional tax, legal, or financial advice. GST rules and rates are subject to change. Consult a qualified CA or tax professional before making compliance decisions.

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