GST on Construction 2025-26 — Works Contract, Flat Purchase & Property Rates

Updated: 3 June 2026 | GST Act 2017 | Notification 11/2017-CT(R) as amended | India

GST on construction depends on property type and end use. Under-construction residential flats: 5% GST (1% for affordable housing). Ready-to-move flats with Occupancy Certificate: 0% GST — exempt from GST. Commercial works contract: 18% GST. Government infrastructure (roads, railways): 12% GST. ITC is blocked for buyers and developers of residential property — the low rate exists precisely because no ITC flows through.

0% OC Flats

No GST on ready-to-move residential property with Occupancy Certificate.
GST applies only on construction services where the building is under construction at the time of the agreement — not on completed/registered property.

GST Rate Table — Construction & Property Type

Property / Contract Type	GST Rate	ITC Available?
Under-construction residential flat (regular)	5%	No — blocked u/s 17(5)(d)
Affordable housing flat (carpet ≤60/90 sq.m., value ≤₹45L)	1%	No — blocked
Ready-to-move flat (with OC/CC)	0% — Exempt	Not applicable
Sale of land / plotted development	0% — Outside GST	Not applicable
Commercial construction (works contract)	18%	Yes (for business use)
Government works — original construction (roads, bridges, dams, railways)	12%	Yes
Government works — repair/maintenance/renovation	18%	Yes
Sub-contractor for residential construction	12% (main rate 5%/1%)	No (if ultimate use is residential)
Renovation/interior decoration of existing residential property	18%	No (personal use)
Painting, whitewashing, flooring (maintenance)	18%	No (personal use)

Works Contract vs Construction Service — Key Difference

A works contract involves supply of both goods (materials) and services (labour) for construction, fabrication, installation, or erection of an immovable property. It is treated as a supply of service under GST, not a mixed supply. The distinction matters because:

Aspect	Works Contract (Commercial)	Construction Service (Residential)
GST rate	18%	5% (or 1% affordable)
ITC on inputs	Available to recipient (if for business)	Blocked — not available
Typical use	Factories, offices, malls, hotels	Apartments, villas, residential flats
Sub-contractor rate	18% (same as main)	12% to main contractor
Government original works	12% (special rate)	—

ITC Rules for Construction

Section 17(5)(d) of the CGST Act blocks ITC on goods or services used for construction of an immovable property (other than plant and machinery) where it is for own account. This means:

A home buyer cannot claim ITC on GST paid at 5%/1% when purchasing a flat.
A builder/developer cannot claim ITC on cement, steel, labour for constructing residential units.
A business constructing its own office building cannot claim ITC on construction inputs used for that building (even if used for taxable outward supply).
Exception: Plant and machinery embedded as part of manufacturing — ITC is allowed. A factory building counts as plant and machinery if used in the production process.
Contractors providing commercial works contract (18%) can claim ITC on their inputs and pass on the credit chain.

GST on Sub-Contractors in Construction

When a main contractor engages a sub-contractor for a project:

Project Type	Main Contractor Rate	Sub-Contractor Rate
Residential (under-construction flat)	5% / 1%	12% charged by sub-contractor to main
Commercial works contract	18%	18% charged by sub-contractor to main
Government original works (road, bridge)	12%	12% charged by sub-contractor to main
Government repair/maintenance	18%	18% charged by sub-contractor to main

The sub-contractor must charge GST on their invoice to the main contractor. The main contractor, if eligible, can claim ITC on this sub-contractor GST to offset their output tax liability.

Frequently Asked Questions

What is the GST rate on a flat purchase in an under-construction building?

GST on under-construction flat purchase is 5% (without ITC) for regular residential projects. For affordable housing projects — defined as units with carpet area up to 60 sq.m. in metro cities or 90 sq.m. in non-metro cities AND value up to ₹45 lakh — the GST rate is 1% (without ITC). There is NO GST on ready-to-move-in flats that have received an Occupancy Certificate (OC) or Completion Certificate (CC). GST is levied on the construction service component only; the land value is excluded from the taxable value.

What is the GST rate on renovation and interior decoration work?

Renovation, interior decoration, painting, plastering, flooring, and similar works carried out on residential or commercial property are classified as works contract services. If the work is on a commercial property or is not for original construction of a residential complex, the GST rate is 18%. If a contractor carries out construction-related renovation on an under-construction residential complex being sold, the 5%/1% rates may apply. Painting and whitewashing of existing buildings generally attract 18% GST as they are maintenance/repair services, not original construction.

Is ITC available on GST paid for construction of a residential property?

No. Input Tax Credit (ITC) is blocked for construction of an immovable property for the buyer/owner under Section 17(5)(d) of the CGST Act. This means if you purchase an under-construction flat and pay 5% GST, you cannot claim that GST as ITC — not against your business GST output tax or otherwise. The restriction applies to goods and services used in construction of immovable property (other than plant and machinery). The developer/builder also cannot claim ITC on inputs for residential construction — which is why the rate is kept low (1%/5%) without ITC.

What is the GST rate for a works contract on government projects like roads and railways?

Works contracts for government projects are taxed at 12% GST for original works (not repair/maintenance). This includes construction of roads, bridges, railways, metro, airports, dams, irrigation projects, and similar civil infrastructure awarded by or to government bodies. Repair, maintenance, renovation, or alteration of existing government structures attracts 18% GST. Sub-contractors working on these government projects also charge the same 12% GST rate as the main contractor, provided the work is for original construction of qualifying infrastructure.

Is GST applicable on the purchase of a plotted development or a plot of land?

Sale of land is outside GST — it is not a supply of goods or services. However, if a developer sells a plot with development of common amenities (roads, drainage, electricity, clubhouse) as part of a plotted development scheme, the developer may be liable to pay GST on the development services. Buyers of developed plots in a layout may effectively bear GST embedded in the overall price. Sale of ready-to-move-in residential units (with OC) is also outside GST. The key rule: GST applies only where construction is ongoing at the time of sale agreement, i.e., before issuance of OC/CC.

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