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.

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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GST Rates

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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New GST Rate on Civil Contractor Services in India

The Government of India is updating GST rates effective after 22 Sep 2025. Below are the expected new GST rates for civil contractor services (no compensation cess).

New GST Rate of Civil Contractor Services

Type of Contractor Work	SAC Code	New GST Rate
Civil construction (buildings, roads, bridges)	9954	18%
Labour-only contract	9985	18%
Sub-contracts under main contractor	9954 / 9985	18%

Old GST Rate of Civil Contractor Services

(Old GST Rates – Applicable Until 21st September)

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

Bharat Choudhary

Chartered Accountant

MRN No.: 189207

City: Navi Mumbai

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

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.

View all FAQs