GST on Construction Services in India

As part of increasing the revenue from tax collection, the payment procedure was eased out. Efforts are going on to bring standardized rates for a common service. If you are in the construction industry, it is advised to take the services of taxation expert specialized in invoicing GST for the construction sector. 

 
What Constitutes construction

The title, “Works contract” contained in section 2(119) of the GST act 2017 has clearly defined the term construction. It can be consolidated for easy understanding as below:

A work contract is a contract for performing any of the following on an immovable property which require transfer of goods to the premises.

Building

Construction
Fabrication
Completion
Erection
Installation
Fitting out
Improvement
Modification
Repair
Maintenance
Renovation
Alteration
Commissioning
The above short description may not cover all aspects of the definition by the GST council for GST on construction. Calling up a professional company that is experienced in carrying out tax related works of construction companies will shed more light into the law. 

The law goes on to include structures that will come under GST in construction. They are:

i) Residential Complex.

ii) Single Residential Unit.

iii) Apartment.

Who Will Pay the GST on construction Services

The entity or person who converts or constructs a building and the person or entity that sells the resultant construction will bear the GST costs equally.

You are constructing a house on your plot to reside with family. Does that mean that you have to share the GST in construction with the contractor who is making money out of it?

In order to comply with the GST laws, you are liable to pay your dues. It is in similar circumstances that the role of a good finance and tax expert comes handy. Don’t hesitate to call their offices and get a proper plan of action to comply with your tax obligations.

What Are the GST Rates for the Construction Sector?

18% is the GST on construction.

However, the construction industry itself has been divided into various segments. They carry different GST rates.

Affordable Housing: 1%

Other Segments: 5%

Construction Materials and Input Services: 18%

ITC Incidence: 8% to 10%

Builders have an option to choose from two different tax structures.

1. For ongoing constructions of affordable residences, builders are free to choose the GST rate of 1% or continue with the existing 8%

2. In the case of houses whose construction is going on, builders can choose to continue with the existing rate of 12% or opt for GST of 5%. 

At the same time, capital goods and input services should be procured from registered suppliers. 

Calculating the GST for construction has to be aligned with other intricacies contained in the definition of the segment. An experienced company that takes care of the GST filing requirements of the construction industry will perform all this at minimal costs. Taxrobo is one such reputed company sought after by many players in the construction industry. 

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