Changes in GST Rates of Construction Sector – 56th GST Council
Meeting
Introduction
The construction sector
plays a pivotal role in India’s economic growth, contributing significantly to
infrastructure development and employment. In the 56th GST Council Meeting held
on 3rd September 2025, several changes in the GST rates applicable to
construction-related goods and services were announced. These revisions aim
to streamline tax rates, correct past anomalies, and bring uniformity in the
taxation of works contract services. The changes will come into effect from 22nd
September 2025.
Construction Sector – GST
Rate Changes
A. Reduction from 12% to
5%
|
S.
No.
|
Chapter
/ Heading / Sub-heading / Tariff Item
|
Description
of Goods
|
|
1
|
68
|
Sand
lime bricks or Stone inlay work
|
B. Reduction from 28% to
18%
|
S.
No.
|
Chapter
/ Heading / Sub-heading / Tariff Item
|
Description
of Goods
|
|
1
|
2523
|
Portland
cement, aluminous cement, slag cement, super sulphate cement and similar
hydraulic cements, whether or not coloured or in the form of clinkers
|
Construction Sector –
Works Contract Services GST Rate Changes
|
S.
No.
|
Description
of Service
|
Earlier
Rate
|
Revised
Rate
|
|
1
|
Composite
supply of works contract and associated services, in respect of offshore
works contract relating to oil and gas exploration and production in offshore
area
|
12%
with ITC
|
18%
with ITC
|
|
2
|
Composite
supply of works contract involving predominantly earth work
(constituting >75% of the value of the works contract) provided to Government
|
12%
with ITC
|
18%
with ITC
|
|
3
|
Composite
supply of works contract provided by a sub-contractor to the main
contractor providing services covered under Sl. No. 2 above (i.e., to
Government)
|
12%
with ITC
|
18%
with ITC
|
Impact on the Sector
1. Positive
Impact (Goods): Reduction in cement and brick rates is a
major relief for builders, contractors, and home buyers, leading to lower
overall construction costs.
2. Negative
Impact (Services): Increase in GST on certain works contract
services may lead to higher costs in government projects involving earthwork
and offshore contracts.
3. Neutral
Effect: Since ITC (Input Tax Credit) is available, businesses
may be able to offset part of the increased cost on services.
FAQs
Q1. When will the new GST
rates in the construction sector be applicable?
From 22nd September 2025, except for tobacco-related products where a
later date will be notified.
Q2. Who will benefit the
most from the reduction in GST rates on cement and bricks?
Builders, contractors,
housing projects, and ultimately homebuyers will benefit due to reduced
construction costs.
Q3. Why was GST on works
contract services increased from 12% to 18%?
The intent is to standardize the tax rate across works contracts, reduce
classification disputes, and align with the general GST rate on services.
Conclusion
The 56th GST Council
Meeting has introduced mixed changes for the construction sector. While
the reduction in GST on construction materials like cement and bricks
provides significant relief and will boost housing affordability, the increase
in GST rates on certain works contract services may raise costs for
government and infrastructure projects. Overall, the changes aim to bring greater
clarity, uniformity, and balance in the taxation of the construction sector
under GST.
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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