Building construction works

For your client engaged in construction of residential houses, GST applicability would be as follows: -

GST rate: 18% (12% CGST + 6% SGST/UTGST) for construction services - GST calculation: On the total contract value, inclusive of material and labor costs

However, there are some exceptions and additional considerations: - 

If the client is providing construction services to a registered person (e.g., a builder or developer), the GST rate would be 18%. -

 If the client is providing construction services to an unregistered person (e.g., individual homebuyer), the GST rate would be 12% (6% CGST + 6% SGST/UTGST). -

If the client is supplying materials (goods) as part of the construction service, GST would apply to the material cost at the applicable rate (e.g., 28% for cement, 18% for steel). - 

The client can avail input tax credit (ITC) on the GST paid on materials (goods) purchased. -

 The client should calculate GST on the total contract value, inclusive of material and labor costs, at the applicable rate.

Additionally, your client may need to consider: -

 Reverse Charge Mechanism (RCM): If the client is receiving construction services from an unregistered person (e.g., labor contractor), they may need to pay GST under RCM. -

Composition Scheme: If the client's annual turnover is up to ₹2 crores, they may opt for the composition scheme and pay GST at a lower rate (e.g., 6%). 

For your client engaged in construction of residential houses, GST applicability would be as follows: -

GST rate: 18% (12% CGST + 6% SGST/UTGST) for construction services - GST calculation: On the total contract value, inclusive of material and labor costs

However, there are some exceptions and additional considerations: - 

If the client is providing construction services to a registered person (e.g., a builder or developer), the GST rate would be 18%. -

 If the client is providing construction services to an unregistered person (e.g., individual homebuyer), the GST rate would be 12% (6% CGST + 6% SGST/UTGST). -

If the client is supplying materials (goods) as part of the construction service, GST would apply to the material cost at the applicable rate (e.g., 28% for cement, 18% for steel). - 

The client can avail input tax credit (ITC) on the GST paid on materials (goods) purchased. -

 The client should calculate GST on the total contract value, inclusive of material and labor costs, at the applicable rate.

Additionally, your client may need to consider: -

 Reverse Charge Mechanism (RCM): If the client is receiving construction services from an unregistered person (e.g., labor contractor), they may need to pay GST under RCM. -

Composition Scheme: If the client's annual turnover is up to ₹2 crores, they may opt for the composition scheme and pay GST at a lower rate (e.g., 6%). 

The GST rate on construction works contracts depends on the nature of the work and the recipient. For construction services provided by a contractor to a developer or builder, the rate is 18% with ITC available to the contractor. For under-construction residential apartments sold by developers to buyers before completion, the developer charges 5% (without ITC) for regular residential projects and 1% (without ITC) for affordable housing. Government works contracts now attract 18% (changed from 12% since July 2022 after the 47th GST Council meeting). Pure labour contracts for a single residential unit are exempt. ITC is blocked on construction of immovable property under Section 17(5)(c), which affects most residential developers. For a complete rate breakdown across all construction categories including the ITC block rules and sub-contractor compliance, this [GST on works contract and construction services guide](https://taxgarden.in/blog/gst-on-works-contract-construction-services-india-2026) covers all the current scenarios.