CONSTRUCTION INDUSTRY UNDER GST

WORKS CONTRACT UNDER GST :

The works contract is a broad concept involving the agreements related to constructing a structure on a property. In addition, it involves the details of the raw materials and products used while undertaking the completion of any project. For example, the GST on construction of residential houses will include the rate of bricks, cement, painting, wallpaper, bathroom fitting, etc. The GST on construction contracts comprises of activities such as:

• Building
• Construction
• Fabrication
• Erection
• Completion
• Fitting Out
• Installation
• Improvement
• Modification
• Maintenance
• Repair
• Renovation
• Commissioning and Alteration of Immovable Property

 

THE STRUCTURES/BUILDINGS THAT ARE PART OF GST ON CONSTRUCTION CONTRACTS ARE:

• Apartment
• Residential Complex
• Single Residential Units
• Industrial Buildings
• Multi and Single Story Building
• Administrative and Commercial Building

According to CGST, 2017, taxpayers have only to pay GST on the under construction property; hence no need to pay GST for ready-to-move-in type property. Despite knowing the above fact, many people face trouble in calculating GST on under construction property. To solve this issue and learn the calculation process, continue reading further.

 

WHAT ARE THE DIFFERENT RATES OF GST ON CONSTRUCTION MATERIALS?

There are varieties of materials used at the construction sites, including cement, sand, bricks, marbles, etc. Hence, a proper taxation system was introduced to manage the costing of these goods. However, GST on construction material varies based on the material used, which still makes the calculations hefty for the dealers and buyers. Here is an overview of these rates:

 

Material	GST Rates
Sand	Asphaltic rocks, oil shale/bituminous, tar sand, natural asphaltites, asphalt- 18% Natural sand- 5%
Mica	12%
Brick	5% – 28%
Cement	28%
Crushed stones, pebbles, gravel	5%
Granite and marble	Bricks – 12% Not in Block – 28%
Steel and IRON	18%
Building Stones	5%
Tiles	5% – 28%
Coal	5%
Wallpaper	28%
Varnish and Paint	28%

 

WHAT ARE IMMOVABLE AND MOVABLE PROPERTIES?

To calculate the rate of GST on construction contracts, one needs to have prior knowledge of the type of property it is. As per the General Clauses Act, 1897, Section 3 discusses the property type. In Section 3 (26), it is clearly stated that anything attached to or evolved from beneficial land falls under the category of immovable goods. Whereas, in Section 3 (36), all other items like jewellery, books, utensils, etc., are considered movable properties. In addition, corps, grasses, and standing timbers are also included in movable properties.

It is to be noted that any property in which one can readily move without any repair, renovation, or work does not require paying GST on construction material, services, contracts, etc. Apart from this situation, people entitled to selling and construction of building/resultant have to pay GST as mentioned in GST on construction contracts.

 

Taxation Rates for Residential and Commercial Properties (GST on Construction)
S.NO.	Nature of Services	Gross Rate	Effective Rate
1.	Affordable residential apartment in a RREP (Commenced on or after 01.04.2019 or ongoing projects opted for new rates) intended for sale	1.5%	1%
2.	Residential apartment (other affordable residential apartments) in a RREP (commenced on or after 01.04.2019) or ongoing projects opted for new rates), intended for sale	7.5%	1%
3.	Commercial Apartments in a RREP (commenced on or after 01.04.2019 or ongoing projects opted for new rates) intended for sale	7.5%	5%
4.	Affordable residential apartment in REP, other than in a RREP (commenced on or after 01.04.2019, or ongoing projects opted for new rates), intended for sale	1.5%	1%
5.	Residential apartment (other than affordable residential apartments) in REP other than in a RREP (Commenced on or after 01.04.2019, or ongoing projects opted for new rates) intended for sale	7.5%	5%
6.	Ongoing projects in specified schemes (of lower rate of tax) where the promoter has not opted for new rates	12%	8%
7.	Commercial Apartments in REP other than in RREP	18%	12%
8.	On going Residential apartments as on 31.03.2019 , other than affordable residential apartments, where promoter has chosen to pay at old rates (other than mentioned from 1 to 6 above)	18%	12%

 

GST RATE ON CONSTRUCTION SERVICES AND MATERIALS :

In general, the GST rate on construction services is 18%. However, this rate varies in the construction sector as for affordable housing; it is 1%. Further, the input service and construction materials rate is 18%, while other segments have 5%. In the case of ITC incidence, the GST rate on construction services ranges from 8% – 10%. For example, to calculate GST on under construction property: Suppose the material and labour cost you 75 INR.; hence, the tax on 45% of this material and labour will be 33.75 INR. The value of GST on construction contracts will be evaluated at the rate of eighteen percent GST, making the amount 6.075 INR. If the profit is 25 INR, then the total sale amount before tax becomes 106.43 INR. This increases to 111.75 INR after imposing 5% GST on construction and no ITC. Apart from this, many tutorials will tell you how to calculate GST under construction property with examples.

Various materials are required, from setting the foundation of the building to adorning it. The rates of GST on construction materials vary; some of these materials used for construction are: Cement: Irrespective of the type of cement, including aluminous, slag, port land, hydraulic, or super sulfate types of cement, the rate is 12% Sand: The sand type used may, and so does its rate. For instance, GST on construction materials such as tar sand, oil shale or bituminous, asphalt, asphaltic rocks, natural asphaltites, bitumen is 18%. But in the case of natural sand or any other type of metal-bearing sand, this rate decreases to 5%. Pebbles, crushed stones, and gravels: The rate of GST on the construction of residential houses and other structures is 5%.

Bricks: Building bricks, fly-ash, siliceous, or other fossil-made bricks are available at the rate of 5%. However, this has been increased to 12% and will be implemented from 1 April 2022. Besides, tiles, ceramic goods, and refractory bricks are available at the rate of 18%. GST on under construction property where materials composed of cement, glass-based blocks used for paving, concrete, artificial bricks can reach up to 28%. Marble and granite: The GST on these materials is 12% and 28% for the blocks and those that are not structured in blocks, respectively. Building stones: 5% GST is levied on slabs and blocks made up of basalt, porphyry, sandstone, or other such building stones. Coal: 5% GST is paid by the buyer. Steel and iron: The products of these materials are available in rolls, wires, blocks, etc., at the rate of 18%.

Mica: 12% GST is levied. Tiles: Different types of tiles have different GST rates; in the case of bamboo flooring and roofing/ earthen flooring tiles, it is 18% and 5%, respectively. On the other hand, cement tiles, plastic flooring or artificial flooring tiles, concrete tiles, etc., can add 28% of GST to your amount. Interiors: Wallpapers, paint, enamels, varnish, electrical appliances, parts, etc., levied 28% on the buyer. Besides, bathroom necessities like the sink, urinals, flushing cisterns, bidets, baths, etc., also have the same GST rate. But pipe and tube fittings such as elbows or sleeves composed of iron, steel, plastic, copper, nickel, aluminum have an 18% GST rate

Hence, you can refer to the above information when calculating GST on construction and the total amount. However, it is not a piece of cake even when you have all the list of rates; therefore, refer to options where you can find how to calculate GST on under construction property with examples. This will give the exact amount and the charges for the goods.

 

IMPORTANT POINTS FROM GST PERSPECTIVE :

1. Check Whether Rate of GST is Correct or
2. Check Whether Time of Supply is correct or not based on project
3. Examine Status of WIP very
4. Check Whether GST has been paid as per exclusive or inclusive
5. Check ITC is Claimed on Personal Account or Not ?
6. Carefully Bifurcate Capital as well as Revenue
7. Check Whether Depreciation on Input has claimed or
8. Carefully Bifurcate External as well as Internal
9. In case of Government Tender Carefully read the Work
10. Carefully Check Input Tax Credit on Capital
11. Compare Nature of Outward Supply with Nature of Inward
12. Compare Sales and Purchase
13. Check GSTR-2A/2B
14. Compare GST Turnover with Audited