GST Rate for Contractors in India: Work Type-Based Tax
Contractors play a key role in construction, infrastructure, and public works. Whether you’re a private builder or working with the government, GST directly affects your billing, compliance, and project cost. This blog explains the gst rate for contractors, how it varies by service type, and what to include in a contractor’s bill.
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Who Is a Contractor Under GST?
Under Goods and Services Tax (GST), a contractor is any person or company providing construction, repair, fabrication, or related services, either to:
- Private clients
- Builders or developers
- Government departments
Contractor services are treated as “works contract services”, especially when they involve both labour and material supply.
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GST Rate of Civil Contractor Services
| Type of Contractor Work | SAC Code | GST Rate |
|---|---|---|
| Civil construction (buildings, roads, bridges) | 9954 | 18% |
| Labour-only contract | 9985 | 18% |
| Sub-contracts under main contractor | 9954 / 9985 | 18% |
GST on Labour Contractor
The gst on labour contractor is 18%, applicable when:
- You supply labour to another contractor or project
- You charge for manpower with or without supervision
- The labour is not hired as an employee but billed through invoice
GST on Government Contractors
| Nature of Work | GST Rate | Comments |
|---|---|---|
| Works contract for Central/State Government | 12% | If for infrastructure or non-commercial use |
| Works contract for commercial government buildings | 18% | Includes offices, housing, etc. |
| Labour contract for government projects | 18% | Unless specifically exempted |
GST on Contractor Bill: Components to Include
- Description of service
- SAC code (e.g., 9954 for construction)
- Taxable value (labour + material or labour-only)
- GST rate (12% or 18%)
- CGST + SGST or IGST breakdown
- Total invoice amount
If you’re billing the government or another registered under GST entity, use their GSTIN and mention if the tax is under forward charge or Reverse Charge Mechanism (RCM).
Input Tax Credit for Contractors
Contractors can claim Input Tax Credit on:
- Raw materials (cement, steel, sand)
- Tools and machinery
- Sub-contractor services
- Transportation and logistics
- Professional services (consulting, architect)
As long as the project is taxable under GST, you can offset your input GST against your output tax liability.
Conclusion
Understanding the gst rate for contractor services helps in correct billing, better project pricing, and smooth compliance—whether you’re building a home, managing labour, or working on a government project.
As a Chartered Accountant with more than 8 years of experience, I have refined my skills in the field and developed a true passion for writing. I specialize in creating insightful content on topics such as GST, income tax, audits, and accounts payable. By focusing on delivering information that is both engaging and informative, I aim to share valuable insights that resonate with readers.
Frequently Asked Questions (FAQs)
- What is the GST rate for contractors in India?Usually 18%, but 12% for certain government infrastructure projects.
- What is the GST on labour contractor services?18% GST is applicable on labour supply under contract (not employment).
- Is the GST on government contractors different?Yes. 12% for public infrastructure, 18% for commercial/government office buildings.
- Do contractor bills need to include SAC codes?Yes. Use 9954 for construction and 9985 for manpower supply/labour contracts.
- Can contractors claim GST Input Tax Credit?Yes, if they are working on taxable projects and properly registered under GST.
