A lot of amendments from 1.5% to 7.5% to 12% and 18%. Still confused? This will give you a clarity on how GST is applicable on Constructions (Works Contract).
Before Starting let us first understand few definitions?
1. “Works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any IMMOVABLE PROPERTY wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.”
2. Residential Real Estate Project means a real estate project which commences on or after 01-04-2019, or in an ongoing project in respect of which:
:- The Promoter has opted for new rate of 1% (effective from 01-04-2019)
:- Commercial apartments is not more than 15 percent of the total carpet area of all the apartments in the project.
3. Affordable residential apartment is a residential apartment in a project which commences on or after 01-04-2019, or in an ongoing project in respect of which
:- The promoter has opted for new rate of 1% (effective from 01-04-2019)
:- having carpet area – up to 60 square meter in metropolitan cities and up to 90 square meter in cities or towns other than metropolitan cities
:- the gross amount charged for which, by the builder is not more than forty-five lakhs rupees.
4. Earth Work has not been defined under any GST provisions. The Webster Dictionary defines Earth Work as “an embankment or construction made of earth specially one used as a field fortification”.
5. Real estate project is defined as the development of a building, converting an existing building or a part in apartments, development of land into apartments / plots for the purpose of selling and includes common areas, development works, all improvements and structures thereon and all easement, rights and appurtenances belonging to such building or land or structure.
Now as we see from above construction of roads, bridge, buildings, etc. are covered under works contract under GST.
Now the rates which are applicable from 18-07-2022 to any type of construction:
Sl No. | HSN | Particulars | Rate | Conditions |
1 | 9954 | (i) Construction of affordable residential apartments by a promoter in a Residential Real Estate Project (RREP) which commences on or after 1 st April, 2019 | 1.5% (Effective 1%) | 1. Promoter has not exercised option to pay integrated tax on construction of apartments at the rates as specified for item (ie) or (if) below 2. The entire consideration has been received after issuance of completion certificate, |
2 | 9954 | (ia) Construction of residential apartments other than affordable residential apartments by a promoter in an RREP which commences on or after 1 st April, 2019 | 7.5% (Effective 5%) | Same as above |
3 | 9954 | (ib) Construction of commercial apartments (shops, offices, godowns etc.) by a promoter in an RREP which commences on or after 1 st April, 2019 | 7.5% | Same as above |
4 | 9954 | (ic) Construction of affordable residential apartments by a promoter in a Real Estate Project (herein after referred to as REP) other than RREP, | 1.5% | Same as above |
5 | 9954 | (id) Construction of residential apartments other than affordable residential apartments by a promoter in a REP other than a RREP which commences on or after 1 st April, 2019 | 7.5% | Same as above |
6 | 9954 | (ie) Construction of an apartment in an ongoing project under any of the schemes specified ( eg PM Awas yogna etc) | 12% | Should not exercise above options |
7 | 9954 | (if) Construction of a complex, building, civil structure or a part thereof, including,- (i) commercial apartments (shops, offices, godowns etc.) by a promoter in a REP other than RREP, (ii) residential apartments in an ongoing project, other than affordable residential apartments, | 18% | Same as above |
8 | 9954 | (vii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, involving predominantly earth work | 12% | |
9 | 9954 | (viii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 and associated services, in respect of offshore works contract relating to oil and gas exploration and production (E&P) in the offshore area beyond 12 nautical miles from the nearest point of the appropriate base line. | 12% | |
10 | 9954 | (x) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 provided by a sub-contractor to the main (x) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 provided by a sub-contractor to the main contractor providing services specified in item (vii) | 12% | |
11 | 9954 | (xi) Services by way of house-keeping, such as plumbing, carpentering, etc. where the person supplying such service through electronic commerce operator is not liable for registration under sub-section (1) of section 22 of the Central Goods and Services Tax Act, 2017. | 5% | |
12 | 9954 | (xii) Construction services other than (i), (ia), (ib), (ic), (id), (ie), (if), (vii), (viii), (x) and (xi) above | 18% | |
13 | 9954 | Pure labor services | 0% | |
So now all the constructions apart from residential apartments mentioned above in (i), (ia), (ib), (ic), (id), (ie) and (if) and few special exemptions as mentioned above are taxable at 18%.
We hope the above blog was helpful in enhancing your knowledge on the matter. In case of any queries feel free to get in touch with our team of experts.
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