GST on Construction — Works Contract, Residential and Commercial

GST on construction and real estate is one of the most complex areas — with different rates applying to affordable vs non-affordable housing, completed vs under-construction flats, works contracts for government vs private, and joint development agreements (JDA). Here is a comprehensive guide to GST rates and compliance for the construction sector.

Works Contract — Definition

• A works contract is a contract involving supply of both services and goods — including construction, erection, installation, commissioning and maintenance of immovable property
• Works contract is treated as a composite supply predominantly of services under GST — not goods
• Works contract services are always taxed in the state where the immovable property is located (place of supply)

GST Rates — Works Contracts

• Works contract for Government/Government bodies (civil structures, roads, drainage): 12% GST (with full ITC)
• Works contract for purely commercial or industrial construction (private): 18% GST (with full ITC)
• Works contract for residential complex (private): 18% GST if it does not qualify as affordable housing
• Works contract for affordable housing: 12% GST (if the houses are affordable residential flats — upto 60 sq.mt. carpet area in metro cities, 90 sq.mt. elsewhere — under PMAY-linked scheme)

GST on Flat Purchase by Buyer

• Under-construction flat (affordable — carpet ≤ 60/90 sq.mt., value ≤ ₹45 lakh): 1% GST (no ITC to builder)
• Under-construction flat (non-affordable / regular): 5% GST (no ITC to builder)
• Completed flat (after occupancy certificate): 0% GST — sale of land and completed building is exempt
• Commercial unit purchase (under-construction): 12% GST (with ITC to builder)

Joint Development Agreement (JDA)

• Landowner transfers development rights to builder in exchange for built units — GST applies on the landowner's supply of development rights (TDR) at the time the builder gives possession to landowner
• Builder's supply to landowner of units: Taxable at applicable rate (1% or 5%) — GST payable by builder when the project is completed

Conclusion

GST on construction depends on whether it's a works contract or flat supply, affordable or non-affordable, government or private — with rates ranging from 1% to 18%. SPOTON provides GST advisory, return filing and audit support for builders, developers and contractors across Kerala. Contact us for expert construction GST compliance services.