GST Rate on Construction Material & Impact on Construction Industry

GST on Construction

Sajhyadri C Posted on October 13, 2025

GST Rate for Construction Materials

Various materials such as cement, sand, tiles, and bricks are fundamental components in construction projects. Consequently, a structured taxation framework was established to regulate the pricing and ensure uniformity across these essential building supplies. Additionally, the Harmonised System of Nomenclature (HSN) Code categorises construction materials into distinct chapters, facilitating systematic classification. Consequently, Goods and Services Tax (GST) rates on building materials vary based on their specific classification and intended use. Below is a detailed overview of these classifications and their corresponding tax implications.

GST on Sand

Natural sand, commonly used in construction for concrete mixes and plastering, attracts a 5% GST rate. However, certain specialised forms of sand, such as bituminous sand, asphaltic rocks, and tar sands, are subject to a higher GST rate of 18% due to their distinct industrial applications.

GST on Bricks

Bricks, a fundamental component in construction, are taxed under varying GST rates based on their composition and manufacturing process:

Standard Clay Bricks: These are subject to a 5% GST rate.
Fly Ash Bricks: Made from industrial waste, these eco-friendly bricks also fall under the 5% GST category.
Sand-Lime Bricks: Comprising sand and lime, these bricks attract a 5% GST rate.
Refractory Bricks: Designed to withstand high temperatures, these specialised bricks are taxed at 18%.
Glass-based Paving Blocks: Used for decorative purposes, these materials are subject to a 28% GST rate.

GST on Gravel and Crushed Stone

The Goods and Services Tax (GST) rates applicable to gravel, pebbles, and various types of stones are as follows:

Gravel, pebbles, and crushed stones, essential for concrete production and road construction, are taxed at a 5% GST rate. This rate applies uniformly to various types of stones, including limestone and calcareous stones used in lime or cement production.

GST on Marble and Granite Blocks

Marble and granite blocks, commonly used in flooring and cladding, attract a 12% GST rate. However, once these stones are processed into finished products like tiles or slabs, the GST rate increases to 28%, reflecting their added value and aesthetic appeal.

GST on Cement

Cement, a primary binding material in construction, is subject to a 28% GST rate. This includes various types of cement such as Portland, aluminous, slag, and super sulphate cement. It's noteworthy that cement-bonded particle boards, a specific type of cement-based product, are taxed at a reduced rate of 5%.

GST on Iron and Steel

Iron and steel products, including rods, wires, blocks, and rolls, are taxed at an 18% GST rate. This uniform rate applies to all forms of iron and steel used in construction, reflecting their essential role in structural frameworks.

GST on Tiles

Tiles, utilised for flooring and wall applications, are subject to varying GST rates based on their material and composition:

Earthen or Roofing Tiles: These are taxed at a 5% GST rate.
Bamboo Flooring Tiles: As an eco-friendly alternative, these tiles attract a 5% GST rate.
Cement or Concrete Tiles: These durable tiles are taxed at 18%.
Ceramic and Artificial Stone Tiles: These decorative tiles also fall under the 18% GST category.
Plastic Wall or Ceiling Sheets: These materials, often used for interior finishes, are subject to a 28% GST rate.

GST Rate for Interiors Used in Construction

In addition to the primary construction materials, various interior furnishings and fixtures also attract Goods and Services Tax (GST) in India. As per the GST 2.0 reforms effective from September 22, 2025, most interior materials have been consolidated into a simplified two-slab structure of 5% and 18%, with previously higher rates eliminated. Below is a detailed overview of the revised GST rates for key interior items:

Copper Wire and Electrical Components

Under Chapter 85 of the Harmonised System of Nomenclature (HSN) Code, insulated copper wire and cables, essential for electrical installations, are now taxed at an 18% GST rate. This category also encompasses electrical machinery, equipment, and their components, including sound and television recorders and reproducers, which similarly attract an 18% GST.

Wallpapers and Wall Coverings

Wallpapers and similar wall coverings, commonly used for interior decoration, are subject to an 18% GST. This rate applies uniformly, irrespective of the material composition or design intricacies, simplifying tax calculations for interior designers and homeowners alike.

Paints and Varnishes

Paints and varnishes, including enamels and lacquers made from synthetic or chemically modified natural polymers, are taxed at an 18% GST rate. This category also covers related products such as glaziers' putty, grafting putty, resin cement, caulking compounds, and other mastics used for indoor surfaces like walls, ceilings, and floors.

Interior Hardware and Accessories

Locks and Padlocks: These security devices, including key-operated, combination, or electrically operated locks, attract an 18% GST.
Base Metal Mountings and Fittings: Items such as fittings for windows, doors, staircases, furniture, or blinds made of base metals are subject to an 18% GST.

Bathroom Fittings and Sanitary Ware

Ceramic Sanitary Fixtures: Products such as washbasins, wash basin pedestals, ceramic sinks, bathtubs, bidets, cisterns for flushing, pans for the water closet, urinals, and similar such items are classified under HSN Code 6910. These are subject to a Goods and Services Tax (GST) rate of 18%.
Iron and Steel Sanitary Ware: Sanitary ware and components thereof made of iron and steel are also subject to an 18% GST.
Plastic and Other Material Fittings: Fittings for tubes or pipes made of materials such as copper, aluminium, iron, nickel, or steel attract an 18% GST rate. However, fittings made of plastic are taxed at a reduced rate of 5%.

New GST Amendments for the Construction Industry Effective From Late September 2025

The construction industry in India is set to witness a major overhaul in its Goods and Services Tax (GST) framework, with the implementation of GST 2.0 from September 22, 2025. These changes aim to simplify the tax structure, provide much-needed relief to the industry, and encourage the development of affordable housing projects and essential government infrastructure. Below, we explore the specifics of the revised GST rates on construction materials, services, and other significant changes that will impact both construction firms and homebuyers.

Key GST Rate Changes for Construction Materials

One of the most significant aspects of the upcoming amendments is the reduction in GST rates on key construction materials. This will directly affect the overall cost of construction and provide substantial relief to builders and developers, as well as buyers of new properties.

Cement: The GST rate on cement, a major component in construction, will be reduced from 28% to 18%. This is the most substantial tax cut in the sector and will directly reduce the cost of construction for builders and developers. Lower cement prices will also make housing projects more affordable.
Steel and Iron Products: Steel and iron products, critical to building frameworks, will continue to be taxed at 18%. While there is no change here, this rate aligns with the broader construction material rate changes, ensuring stability for builders who rely on these materials.
Tiles, Paints, and Coatings: These items, often used for finishing, will also benefit from reduced GST rates. The tax on tiles, paints, and coatings will be lowered to 18%, from the previous higher rates. This reduction will help control overall costs for both commercial and residential projects.
PVC Pipes and Stone Materials: The GST on PVC pipes, used extensively in plumbing, as well as unpolished domestic stone and marble, will be set at 5%. This will lower the cost of essential plumbing and construction materials, benefiting both large developers and small-scale builders.
AAC Blocks: A notable change is the reduction in the GST on Autoclaved Aerated Concrete (AAC) blocks containing fly ash. These eco-friendly materials will now be taxed at 12%, a reduction from the previous rate of 18%. This move aligns with the government's push for sustainable building materials and is expected to encourage the use of green construction practices.
Sand and Crushed Stones: Sand, natural crushed stones, pebbles, and gravel, essential for foundational and decorative purposes, will attract a 5% GST. This change reflects the push to reduce costs for builders, especially for projects in rural or economically weaker areas.

GST Rates on Construction Services

The GST amendments also bring about changes to the taxation of construction services. These changes primarily impact residential projects, affordable housing, and government infrastructure works.

Commercial Construction Services: GST on commercial construction services, including works contracts, will remain at 18%. This ensures consistency for developers engaged in constructing office buildings, shopping malls, and other commercial properties.
Residential Complex Construction: The GST rate for residential complex construction, which previously fell under a 12% tax bracket, will now be streamlined to a 5% GST rate. The move is designed to provide relief for residential developers and make housing projects more affordable to the general public. The revised scheme will apply with input tax credit (ITC), further easing the financial burden on builders.
Affordable Housing: One of the most significant changes is the reduction of GST for affordable housing projects, which will now be taxed at a mere 1%. This initiative aims to boost the government's goal of providing affordable homes to the masses, particularly for low-income families. The 1% tax will make it easier for developers to build cost-effective homes and pass on the savings to buyers.
Government Infrastructure Contracts: For government infrastructure projects, such as the construction of roads, sewer systems, and irrigation pipelines, GST will remain at 5%. However, certain exemptions will apply based on the project’s scope and scale. This will benefit builders engaged in large-scale public infrastructure projects.
Works Contracts for Specific Government Projects: In the case of works contracts for specific government infrastructure projects, the GST rate will be revised from the previous 12% (with ITC) to 18% (with ITC). This change will affect the financial planning of construction firms involved in government projects and could impact the overall project cost.

Other Important Updates and Rulings

The GST reforms also introduce a host of other important updates that will shape the way construction services and materials are taxed moving forward.

Under-construction Properties: As per the new amendments, construction services for under-construction properties will continue to be treated as a supply of service, and thus subject to GST. However, once a property is completed and ready for sale, it will be exempt from GST. This change streamlines the tax treatment for ready-to-move-in homes and ensures clarity for both developers and buyers.
Input Tax Credit (ITC) Eligibility: Supreme Court rulings have clarified the eligibility for ITC in cases related to commercial rental services in the construction sector. This decision will make it easier for construction companies and commercial property owners to claim back input taxes on eligible expenses related to their construction projects.
Section 17(5)(d) of the CGST Act: Amendments to this section update the terminology surrounding ITC claims on plant and machinery used in construction activities. This change is significant for companies that rely heavily on machinery for construction purposes and ensures better clarity in claiming ITC.
Streamlined Two-slab System: The GST 2.0 reform replaces the previous multiple tax slabs for construction materials and services with a simplified two-slab system of 5% and 18%. This streamlined approach aims to reduce the complexity of the tax structure, enhance compliance, and ease the financial burden on the construction sector.

The GST 2.0 amendments to the construction industry mark a pivotal shift toward simplifying the tax system, providing substantial relief on key materials, and promoting affordable housing and infrastructure projects. With reduced taxes on critical materials like cement, steel, and tiles, along with a significant reduction for affordable housing projects, these changes are set to make construction more cost-effective for developers and more accessible for homebuyers.

The rationalisation of GST on construction services, especially the reduction in rates for residential projects, coupled with an improved ITC structure, will bring much-needed relief to the sector. These reforms not only benefit large builders but also support small-scale developers and boost the government's vision of affordable housing for all.

Impact of GST on Construction Sector

The recent GST reforms have significantly influenced the construction industry. Key changes include:

Under-construction Residential Properties: These properties are subject to a 5% GST rate without the benefit of Input Tax Credit (ITC).
Affordable Housing: For homes priced below ₹45 Lakhs, the GST rate is reduced to 1% without ITC.
Commercial Real Estate: Commercial properties attract a 12% GST rate with ITC advantages.
Transportation of Construction Materials: The transportation of goods carrying building materials, including fuel costs, is now subject to a 12% GST.
GST Options for Operators: Operators have the flexibility to choose between paying 5% GST without ITC or 12% GST with ITC. This choice can be made at the beginning of the fiscal year.

Conclusion

India's GST 2.0 reform marks a significant shift towards a more streamlined and transparent tax system. By consolidating multiple tax slabs into a simplified structure, the reform aims to reduce compliance burdens and lower costs across various sectors. However, its success will depend on effective implementation, stakeholder collaboration, and ongoing adjustments to address emerging challenges. Continued innovation and cooperation will be essential to ensure that the benefits of GST 2.0 are fully realized, fostering sustained economic growth and development.

FAQs

What are the key GST rate changes for construction materials under GST 2.0?

GST 2.0 introduces significant reductions: cement from 28% to 18%, tiles, paints, and coatings to 18%, and sand, crushed stones, and gravel to 5%. Additionally, AAC blocks with over 50% fly ash content are now taxed at 12%, promoting eco-friendly construction materials.

How does GST 2.0 impact GST rates on construction services?

Under GST 2.0, residential complex construction is taxed at 5%, replacing the previous 12%. Affordable housing projects benefit from a reduced rate of 1%. Commercial construction services remain at 18%, while certain government infrastructure contracts have seen their rates revised from 12% with ITC to 18% with ITC.

Can builders claim Input Tax Credit (ITC) under the new GST framework?

Yes, builders can claim ITC on construction materials and services used in taxable supplies. However, ITC is not available for residential construction sold before completion. ITC is also restricted on work contract services for constructing immovable property, except for plant and machinery.

What is the GST rate for under-construction properties under GST 2.0?

Under-construction properties attract a GST of 5% without Input Tax Credit (ITC). Affordable housing projects benefit from a reduced rate of 1%. Once a property is completed and ready for sale, it is exempt from GST, aligning with the government's push for affordable housing.

How does GST 2.0 simplify the tax structure for the construction industry?

GST 2.0 streamlines the tax system by consolidating multiple slabs into two primary rates: 5% and 18%. This simplification reduces compliance burdens, enhances transparency, and lowers costs for developers, ultimately benefiting consumers through more affordable housing options and improved infrastructure projects.