GST On Construction Industry (Rate and Credit Inputs)

GST on Construction Introduction:

The Good and Services Tax (GST) is the biggest and significant indirect tax reforms. The essential purpose of implying the GST to replace the existing taxes such as excise duty, service tax and sales tax. GST is a game-changer for the Indian economy. However, GST introduced in the midnight of 1st July 2017 with the objective of “one nation, one market,”

The construction industry has become the crucial pillar of the Indian economy and has seen the extraordinary growth not only in urban cities but also in rural areas as well. However, the construction centre has become the second-largest employment creating sector after agriculture.

 Tax on Construction Industry:

The taxability of construction has always been challenging and litigation under indirect taxes. Both the developer and buyer should have to deal with the issue of emerging multitude taxes such as Central Excise, Entry Tax, VAT and Local Bodies etc. according to the GST regime. The concept of GST tax collected from the construction industry that would impact on the economy of India in a growing sense. Further, real state sectors face many challenges such as state-specific rates, different schemes for paying tax and different valuation of VAT and Service tax etc.

Impact of GST On Construction Industry:

GST is another development made by the Government has a significant impact on the construction industry. So, let's take a look at the impact of GST on the construction industry.

Accountability With Transparency
GST has a more substantial impact regarding transparency as well as playing a role in reducing the transaction. Today, a massive percentage of project expenditure goes off the books, but GST will help to cut down fake billing practice on the purchase side of the construction sector.

Efficient And Acquienscence:
GST will permit the quick and effortless transfer of goods among states on the abolition of central state and local taxes. The construction industry will stand to get benefits of improving tax compliance by implementing a uniform tax structure. However, GST ensures an overall efficient taxation system by replacing the indirect taxes to a single tax.

 Input Tax Credit (ITC):
The applicant can only claim for ITC if he has registered under GST besides the increase of the rate of 18% on the supply of works that may be higher from previous grades. Now, the local composition scheme of tax is over. Many construction industries, like dams, roads, etc., could eligible for ITC if they have registered under GST.

Registration and Stamp Duty:
The main hurdle is stamp duty while registering under GST. However, there is no provision which provides the input tax sett off for the stamp duty for the land which against the premises of GST. Moreover, while registring on construction state transaction, there would be no charge on it.

Multiple Taxation:
The construction industry faced many issues related the double taxation, which has been amounted over 25% of taxes, by registering under GST, having many benefits of getting rid of the double taxation for home buyers and investors to pay several state taxes at many levels.

Contract Working Under GST:

Defines Under Section2 (119) of GST
Contract of Immovable Property kept only Under GST.
Composite Supply of Goods and Services


The implementing of GST on the construction industry has a significant impact while removing the other indirect taxes. However, it has been seen that company face many hurdles for claiming on ITC in residential projects while introducing of new taxation scheme defeated the last limitations and registered the construction industries under GST to allow the unrestricted residential projects. The indirect taxes also removed by welcoming the GST which introduced bt Government which provide an easy and efficient way to run the construction industry and many other businesses.

Drafted By:
CS.A.Maniraj.,B.Com.,ACS.,CA(Fin), Independent Director 
Certified CSR Professional., Certified GST Professional.

GST On Construction Industry (Rate and Credit Inputs)
Maniraj Anantham 1 March, 2024
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