Applicability of GST on Construction Industry Part 2
Applicability :
GST is applicable to construction activities in India, whether it is private construction, commercial construction, or construction of flats/society. In other words, any property under construction which is intended for sale is considered a supply of service and, therefore, liable for GST. The ready-for-sale properties do not attract any GST. GST is only payable on under-construction properties. However, the applicability of GST on construction work depends on various factors such as the type of construction, the nature of the transaction, and the status of the parties involved in the transaction.
As per para (5b) of Schedule II of the CGST Act, supply of services is defined as the construction of a complex, building, civil structure, or a part of it, which is meant for sale wholly or in part. However, if full consideration is received after the issuance of the certificate of completion, it is not considered a supply of services and is exempt from GST. In other words, GST is applicable only on under-construction properties.
Exemptions for construction sector-
- GST on the construction work of affordable apartment housing projects : 1% GST will be applicable. Here, Affordable housing means residential properties with a carpet area of up to 60 square meters in metropolitan cities and up to 90 square meters in non-metropolitan cities, with a value equal to or less than Rs. 45 lakhs.
- GST will not be applicable in case of construction of properties for resale, buying and selling apartments to be used as a residence, and the buying or selling of land.
- The construction services or enhancement services provided through pure labour contracts under the Pradhan Mantri Awas Yojana(PMAY) are exempt from GST.
- Construction services through pure labour contracts for a single residential unit or a part of a residential complex are also exempt from GST.
Special point Regarding E-Way bill : which is required for the transportation of building materials such as cement, steel, etc only where the consignment value exceeds Rs.50,000.
The businesses involved in the supply of construction services are required to raise invoices wherever they are registered under GST.
Applicable Rate of GST :
| Activity | Rate of GST |
| Affordable housing apartment construction for projects beginning on or after 1st April 2019 | 1% |
| Non-affordable housing apartment construction for projects beginning on or after 1st April 2019 | 5% |
| Construction of commercial apartments in REP except RREP. | 12% |
| Works contract services (where the material is supplied by the contractor) | 12% |
| Works contract services (where only labour is supplied by the contractor) | 18% |
| Composite supply of works contract and goods (where the value of goods is less than 25% of the total contract value) | 18% |
| Composite supply of works contract and goods (where the value of goods is 25% or more of the total contract value) | 12% |
Special : One Third of the value will be reduced on account of Land.
