GST on construction depends on the property type and stage. Under-construction residential flats are taxed at 5% without ITC (1% for affordable housing). Ready-to-move flats with an Occupancy Certificate carry no GST, and sale of land is outside GST. A works contract (commercial or government) is now taxed at 18% with ITC — the earlier 12% government rate was removed under GST 2.0 from 22 September 2025.
From 22 September 2025 the GST Council removed the 12% slab. Government works contracts (roads, bridges, irrigation, earthwork) moved from 12% to 18% with ITC, and cement dropped from 28% to 18%, lowering builder input costs. The 1% / 5% rates on residential flats and the ready-to-move exemption were not changed.
GST on Construction — Rate Table
Every common construction and property scenario, with the GST rate and whether Input Tax Credit is available.
| Property / Contract Type | GST Rate | ITC | Notes |
|---|---|---|---|
| Under-construction residential flat (regular) | 5% | No | Blocked u/s 17(5)(d) · on construction value |
| Affordable housing (carpet ≤60/90 sq.m., value ≤₹45L) | 1% | No | Metro 60 sq.m. / non-metro 90 sq.m. |
| Ready-to-move flat (with OC/CC) | Nil | — | Not a supply — outside GST |
| Sale of land / plotted development | Nil | — | Land is outside GST |
| Commercial works contract | 18% | Yes | Offices, malls, factories, hotels |
| Government works — original construction | 18% | Yes | Roads, bridges, dams (12%→18% from 22 Sep 2025) |
| Government works — repair / maintenance | 18% | Yes | Unchanged |
| Sub-contractor on works contract | 18% | Yes | Same 18% as main contractor |
| Renovation / interior of existing property | 18% | No* | Maintenance service · *blocked if personal |
| Cement (input material) | 18% | Yes | Cut from 28% under GST 2.0 |
Rates reflect the GST 2.0 two-slab structure effective 22 September 2025 (CBIC notifications 09-17/2025-CT(R)). Confirm on the official GST portal before invoicing.
GST on Flat Purchase — 5%, 1% or Nil?
The single question that decides GST on a flat is whether the building had received its Occupancy / Completion Certificate before you signed the agreement. GST applies only to under-construction property; a completed, ready-to-move flat is outside GST entirely.
Ready-to-move — no GST
- Occupancy / Completion Certificate issued
- Sale of a completed unit is not a supply
- No GST on the purchase price
- Only stamp duty & registration apply
- ITC not relevant
Under-construction — 5% / 1%
- Agreement signed before OC/CC
- 5% on regular residential flats
- 1% on affordable housing
- No Input Tax Credit for the buyer
- GST charged on construction value, not land
GST is levied on the construction service component only — the land value is excluded (a standard one-third deduction applies to the total consideration where land is bundled).
5% Regular under-construction flat
1% Affordable-housing flat
A buyer paying 5% or 1% GST on an under-construction flat cannot claim it as ITC — Section 17(5)(d) blocks credit on construction of immovable property. The builder also gets no ITC on cement, steel or labour for residential units, which is exactly why the rate is kept low without credit.
Buying an under-construction flat and unsure of the GST charged?
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GST on Works Contract — 18%
A works contract bundles goods (materials) and services (labour) for building, fabricating or installing immovable property. Under GST it is treated as a supply of service. After GST 2.0 removed the 12% slab, all works contracts — commercial and government — are taxed at 18% with ITC from 22 September 2025.
| Aspect | Works Contract (Commercial / Govt) | Residential Flat Construction |
|---|---|---|
| GST rate | 18% | 5% / 1% |
| ITC on inputs | Yes (business use) | Blocked |
| Typical use | Factories, offices, malls, roads | Apartments, villas, flats |
| Charged by | Contractor to client | Builder to home buyer |
| Government original works | 18% (was 12%) | — |
Government infrastructure works (roads, bridges, dams, earthwork) moved from 12% to 18% with the removal of the 12% slab under GST 2.0.
- 1Contract signedWorks contract — goods + labour
- 2Contractor bills18% GST on the contract value
- 3Client claims ITCIf for business / taxable output
- 4Net costITC chain reduces effective cost
Running works contracts? Get your rate classification and ITC chain reviewed.
Talk to a GST Expert →GST on Sub-Contractors in Construction
When a main contractor engages a sub-contractor, the sub-contractor charges GST on its invoice to the main contractor, who can claim it as ITC. After GST 2.0, the earlier 12% concessional sub-contractor rate on government works is gone — most sub-contract works are now at 18%.
| Project Type | Main Contractor | Sub-Contractor |
|---|---|---|
| Under-construction residential flat | 5% / 1% | 18% to main |
| Commercial works contract | 18% | 18% to main |
| Government original works (road, bridge) | 18% | 18% to main |
| Government repair / maintenance | 18% | 18% to main |
The main contractor can offset sub-contractor GST as ITC against its output tax where the credit chain is not blocked.
ITC on Construction — When Is It Blocked?
Section 17(5)(d) of the CGST Act blocks ITC on goods and services used for construction of an immovable property on own account (other than plant and machinery).
- A home buyer cannot claim ITC on the 5% / 1% GST paid on a flat.
- A builder gets no ITC on cement, steel or labour for residential units — the low rate replaces credit.
- A business constructing its own office generally cannot claim ITC on those construction inputs.
- Exception: plant & machinery embedded in the production process remains ITC-eligible.
- A commercial works contractor (18%) can claim ITC on inputs and pass on the credit chain.
The 18% works-contract rate looks higher than the 5% residential rate, but with full ITC the effective tax cost on a commercial or government project can be lower. Choosing the right classification — construction service vs works contract — directly changes your cash outflow.
- Rates & notifications: gst.gov.in
- CBIC rate finder: cbic-gst.gov.in
- Rate schedule: Notification 11/2017-CT(R) as amended
- GST 2.0 changes: CBIC Notifications 09-17/2025-CT(R) (eff. 22 Sep 2025)
- ITC block: Section 17(5)(d), CGST Act 2017
Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position with the official source before you act on it.