Construction SectorReal Estate

GST on Cement & Construction — Materials, Works Contract & Real Estate

Complete guide to GST on construction: cement at 28%, steel at 18%, sand at 5%, works contract (12%/18%), affordable housing at 1%, commercial real estate at 12%, and the ITC reversal impact on residential builders.

28%

Cement

Sand & Aggregate

18%

TMT Steel Bars

12%

Bricks (fly ash)

12%/18%

Works Contract

28%

Ready-Mix Concrete

18%

Tiles & Marble

Affordable Housing

Construction Industry GST Framework

Cement — 28% GST

Cement (all types: OPC, PPC, PSC, white cement) attracts the highest slab of 28% GST. Pre-GST effective rate was ~31% (excise 12.5% + VAT ~14.5% + cascading). GST reduced the effective rate marginally. Industry has repeatedly demanded reduction to 18% citing its role as a common man's essential for housing, but the Council has not revised this due to revenue implications (~₹35,000 Cr collection).

Works Contract — 12%/18%

Works contracts (construction services involving both goods and materials): Government/housing projects: 12% (with restricted ITC). Commercial construction: 18% (with full ITC). Original works for government: 12%. Maintenance/repair works: 18%. Composite supply of works contract is treated as supply of services under Schedule II. Sub-contractor bills also at applicable rate.

Affordable Housing — 1% GST

Landmark 2019 decision: affordable housing (carpet area ≤60 sqm in metros, ≤90 sqm in non-metros, value ≤₹45 lakh) attracts just 1% GST without ITC. Non-affordable residential: 5% without ITC. Commercial: 12% with ITC. Condition: 80% of inputs must be purchased from registered dealers. This replaced the earlier 8%/12% with ITC regime.

Steel & Iron Products

TMT bars, structural steel, angles, channels: 18%. Stainless steel: 18%. Iron & steel scrap: 18%. Wire rods: 18%. Pre-GST steel was at ~19-20% effective rate (excise + VAT). ITC chain for construction is broken because residential builders (1%/5% without ITC) cannot claim credit on steel purchased at 18% — this increases project cost.

Sand, Aggregate & Bricks

Natural sand: 5%. Crushed stone/aggregate: 5%. Fly ash bricks: 12%. Clay bricks: 12%. Concrete blocks: 12%. Marble/granite (raw blocks): 12%. Marble slabs (polished): 18%. Ceramic/vitrified tiles: 18%. Sanitary ware: 18%. Ready-mix concrete (RMC): 28% — frequently demanded for rate reduction.

Real Estate ITC Impact

Under the 1%/5% without-ITC regime (post April 2019): builders cannot claim ITC on cement (28%), steel (18%), or services. This 'embedded tax' increases construction cost by 8-10%. The trade-off: lower headline rate for buyers vs higher actual cost for builders. Developers must reverse any ITC claimed on inputs used for residential projects.

Construction Materials & Services — Rate Table

Item/Service	HSN/SAC	GST Rate	Notes
Cement (OPC, PPC, all types)	2523	28%	Highest-taxed construction input
Ready-mix concrete (RMC)	3824	28%	Demanded to be at 18%
TMT steel bars	7214	18%	Structural steel
Sand, stone aggregate	2505/2517	5%	Natural minerals
Fly ash/concrete bricks	6815	12%	Building blocks
Ceramic/vitrified tiles	6907/6908	18%	Reduced from 28% in 2019
Marble slabs (polished)	6802	18%	Cut and polished
Sanitary ware	6910	18%	Reduced from 28% in 2019
Works contract (government)	9954	12%	Restricted ITC
Works contract (commercial)	9954	18%	Full ITC available
Affordable housing (≤₹45L)	9972	1%	Without ITC
Non-affordable residential	9972	5%	Without ITC

Frequently Asked Questions

Why is cement taxed at 28% under GST?

Cement was placed in the 28% slab because pre-GST effective taxation (excise 12.5% + VAT 14.5% + octroi/entry tax) was approximately 31%. The GST Council kept it at 28% to maintain revenue neutrality. Annual GST collection from cement exceeds ₹35,000 crore. Despite industry demands, reduction to 18% hasn't happened due to the significant revenue impact.

What is the GST on residential apartments?

Post April 2019: Affordable housing (≤60/90 sqm carpet area, ≤₹45 lakh value) = 1% without ITC. Non-affordable residential = 5% without ITC. Commercial properties = 12% with ITC. The 'without ITC' condition means builders cannot claim credit on inputs (cement 28%, steel 18%, services 18%), which adds 8-10% embedded tax cost to projects.

Can builders claim ITC on construction materials?

Under current rules (post April 2019): NO for residential projects (1%/5% without ITC scheme). YES for commercial projects (12% with ITC). Builders doing both must maintain separate books and reverse ITC proportionally. The no-ITC regime was introduced to simplify compliance and lower the headline rate for homebuyers, but increases actual construction cost.

What is works contract under GST?

Works contract = construction/fabrication involving transfer of property in goods (materials + labor combined). Treated as supply of SERVICES under Schedule II of CGST Act. Rate: 12% for government projects (with restricted ITC) and 18% for commercial/private projects (with full ITC). Sub-contractors charge the same applicable rate to main contractors.

Construction Billing — Multi-Rate GST Handled

Laabam.One manages works contract invoicing, ITC reversal for residential projects, RCM on cement purchases, sub-contractor billing, and real estate GST compliance with ease.

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