New GST Rate for Construction Services in India
Construction services form the backbone of infrastructure and real estate development in India. Whether it’s a housing project, a commercial mall, or a government road, GST applies at every level. This guide explains the gst rate for construction services, how it varies based on project type, and its impact on pricing and compliance.
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New GST Rate on Construction Services in India
The Government of India is updating GST rates effective after 22 Sep 2025. Below are the expected new GST rates for common construction service categories (no compensation cess).
New GST Rate for Construction Services (General)
| Type of Construction | New GST Rate |
|---|---|
| Commercial construction services (works contract) | 18% |
| Residential complex (legacy 12% with ITC → rationalised) | 5% (no ITC) |
| Residential complex (new scheme, without ITC) | 5% |
| Affordable housing projects (new scheme) | 1% |
New GST Rate on Civil Construction Services
| Service | New GST Rate | SAC Code |
|---|---|---|
| Road / highway construction | 5% or Exempt (for eligible Government contracts) | 9954 |
| Water pipeline / sewer systems | 5% | 9954 |
| Irrigation systems | 5% | 9954 |
| Commercial civil works | 18% | 9954 |
New GST Rate on Construction Services to Government
| Type of Government Contract | New GST Rate |
|---|---|
| Works contract for Government infrastructure (roads, water, sewerage, irrigation, etc.) | 5% (where earlier 12% applied) / Exempt for notified categories |
| Construction of houses under PMAY/CLSS & notified affordable housing | 1%–5% (1% for affordable; legacy 12% lines align to 5%) |
| Other Government buildings (offices, hospitals not under special notification) | 18% |
Notes: Under the rationalised slabs, prior 12% entries generally align to 5%. Exemption continues for specifically notified public works; commercial/non-notified works remain at 18%.
What Are Construction Services Under GST?
Construction services include any work related to:
- Building construction (residential, commercial, industrial)
- Civil engineering projects (roads, bridges, water systems)
- Repairs and renovations
- Public infrastructure projects
These services fall under SAC Code 9954, and are taxed differently depending on whether the project is residential, commercial, or government-related.
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Old GST Rate for Construction Services (General)
(Old GST Rates – Applicable Until 21st September)
| Type of Construction | GST Rate |
|---|---|
| Commercial construction services | 18% |
| Residential complex (under construction, with ITC) | 12% |
| Residential complex (under new scheme, without ITC) | 5% |
| Affordable housing projects (new scheme) | 1% |
Old GST Rate on Civil Construction Services
| Service | GST Rate | SAC Code |
|---|---|---|
| Road/highway construction | 12% or Exempt (if Govt contract) | 9954 |
| Water pipeline/sewer systems | 12% | 9954 |
| Irrigation systems | 12% | 9954 |
| Commercial civil works | 18% | 9954 |
Old GST Rate on Construction Services to Government
| Type of Government Contract | GST Rate |
|---|---|
| Works contract for government projects (infrastructure) | 12% |
| Construction of houses under PMAY/CLSS | 1%–12% |
| Other government buildings (office, hospitals) | 18% |
GST Compliance for Construction Businesses
- Must register under GST if turnover exceeds ₹20 lakhs
- Use SAC code 9954 for invoicing
- Maintain separate records for ITC-eligible and ineligible projects
- File monthly or quarterly GST returns
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Input Tax Credit in Construction Services
| Scenario | ITC Allowed? |
|---|---|
| Commercial projects (under 18% GST) | ✅ Yes |
| Residential under old 12% scheme (pre-2019) | ✅ Yes |
| Residential under 5% scheme (post-2019) | ❌ No |
| Affordable housing under 1% scheme | ❌ No |
| Government projects (at concessional rates) | Depends on contract terms |
Conclusion
Knowing the correct gst rate for construction services helps contractors, builders, and clients quote, budget, and bill correctly—especially when projects span residential, commercial, and government categories.
I am a Chartered Accountant with over 20 years of experience and a finance content writer. I focus on educating people about finance and taxation. I have written many blog posts on finance, taxation, trading, and investment on the BUSY website. My goal is to increase financial understanding by making complex concepts easier to grasp and to support educational programs in India.
Frequently Asked Questions (FAQs)
- What is the current GST rate for construction services?It ranges from 1% to 18%, depending on the project type (affordable housing, general residential, commercial).
- What is the GST rate for construction services on commercial projects?It is 18%, with full Input Tax Credit available.
- Are government construction services taxed?Yes, usually at 12%, with exemptions for certain public infrastructure projects.
- Can builders claim Input Tax Credit?Yes, only under the 12% or 18% GST schemes. Not allowed under 1% or 5% concessional rates.
- What is the GST rate on civil construction services like roads or bridges?12% or exempt if it qualifies under specific government infrastructure categories.
