In India, the taxation system works in two major ways; one is Direct Tax, applicable to income & monetary gains, and the other one is Indirect Tax, which applies to the trade of various goods and services. You can check for any updates on an authentic online property portal.
GST, or Goods & Services Tax, was implemented in 2017 in India, aiming to replace the old indirect taxation system in the country. Before GST, different types of indirect taxes were applicable on the trade as Service Tax, Sales Tax, and VAT (Value Added Tax).
GST On Construction
In India, a specific percentage of GST is applied to the Construction & Real Estate industry. However, you may have to bear various GST taxation percentages on different types of construction raw materials and related goods. A standard 18% GST is applicable on construction services in the country. When searching for GST-compliant projects or understanding taxation better, using a trusted online property portal can help buyers and investors make more informed decisions.
Different Types Of GST Rates On Construction Services In India, 2025
- 1% without ITC on Affordable Housing Projects empowered by the Govt.
- 18% GST is applicable on the completion and finishing services like; painting, grouting, tiling, etc.
- 18% GST is applicable on the composite supply of works contact (value of goods is less than 25%).
- 12% GST is applicable on the composite supply of works contact (value of goods is more than 25%).
- 18% GST is applicable on the construction of commercial complexes.
- 12% GST (after 1/3rd land deduction) on the construction of residential complexes.
- 18% GST is applicable on the construction of airport runways, bridges, highways, roads, railways, and tunnels.
- 18% GST is applicable on the masonry services.
- 12% GST is applicable on the works contact for government, or local authorities.
All You Need To Know About Construction & GST In 2025
GST applies to construction services, and it is specially applied to under-construction projects. As per the GST rules, incomplete properties have GST applicable.
However, it does not apply to the properties that are completed and handed over to clients. But, a completion certificate needs to be furnished as proof. You can explore more information on the implications of GST on various construction services on the reliable real estate portal online.
Let’s discuss different types of GST percentages applied to construction services and materials.
1. Affordable Housing
As per the government housing policy, a 1% GST reduction is allowed on the total applicable GST percentage on the purchase of any residential property with a total value of ₹45 Lacs or less. The total carpet area of 90 square meters in the none-metropolitan cities and 60 square meters carpet area is approved in the metropolitan cities.
2. E-Way Bills
It is a specific practice under the GST mechanism that states that an e-way bill has to be furnished if the purchase of construction materials like steel, concrete, and cement exceeds ₹50,000. This practice keeps control over the large consignments against any fraudulent transactions.
3. Exemptions
GST is exempted on certain construction-based transactions. It is not applicable on the sale and purchase of any land; it is also not applied on the completed residential properties and the resale of any existing property. Further, if any sort of maintenance or extension construction services are given under the Pure Labour Contract are exempted from GST as per the Pradhan Mantri Awas Yojana (PMAY).
4. Pure Labour Contract
A special exemption is applicable under the Pure Labour Contract. Any construction services rendered for a single-unit residential house for its maintenance or extension or within a residential housing complex.
Challenges In The GST For The Construction Industry
1. Cash Flow Is A Challenge
An individual can face an issue of cash flow when one has to pay GST on an accrual basis without receiving payments from their clients.
2. Classification & Rates
Calculating and classifying the exact percentage of the GST applicable to various types of construction services and materials is a challenging task that may lead to sustaining disputes with the Taxation department.
3. Compliance
It may be challenging for the small & medium level realtors to understand and comply with the GST needs due to the lack of knowledge or required experience. Thus, hiring a professional realtor for professional assistance would be advised.
