What is a Works Contract Under GST?
A works contract is a contract that involves both supply of goods and services for construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of any immovable property. Under GST, works contracts are treated as a composite supply of services.
💡 Key Rule
Works contracts are always treated as supply of services under GST — never as supply of goods. The contractor charges GST on the entire contract value including materials.
GST Rates on Works Contracts 2026
| Type of Works Contract | GST Rate |
|---|---|
| Construction of affordable residential apartments | 12% |
| Construction of other residential apartments | 18% |
| Construction of commercial buildings | 18% |
| Works contract for government — original works | 12% |
| Works contract for government — repair/maintenance | 18% |
| Construction of roads, bridges, tunnels (government) | 12% |
| Construction of low-cost housing under government scheme | 12% |
| Pure labour contracts (no materials supplied) | 18% |
| Maintenance, repair of any immovable property | 18% |
ITC on Works Contracts — Who Can Claim?
ITC on works contract services is blocked under Section 17(5)(c) and (d) in most cases:
| Who Receives Works Contract | ITC Claimable? |
|---|---|
| Individual / business constructing for own use | No — ITC blocked |
| Real estate developer (selling flats) | Yes — further supply of immovable property |
| Works contractor receiving sub-contract | Yes — used for further works contract supply |
| Factory building construction | Partial — only if qualifies as plant and machinery |
⚠️ Plant and Machinery Exception
ITC is available on works contract for construction of plant and machinery — structures that are integral to the manufacturing process (e.g. a blast furnace, a storage tank that is part of a pipeline) may qualify. This is a fact-specific determination and often contested.
Reverse Charge on Works Contract
When a registered person receives works contract services from an unregistered supplier, Reverse Charge Mechanism (RCM) applies. The recipient must pay GST at 18% under RCM.
Also, when a Government entity receives works contract services from any registered supplier for construction of civil structures, the Government entity pays GST under RCM.
HSN/SAC Code for Works Contracts
| Works Contract Type | SAC Code |
|---|---|
| Construction of buildings | 995411 |
| Construction of roads and highways | 995421 |
| Electrical installation works | 995461 |
| Plumbing and related services | 995462 |
| General construction of civil engineering | 995490 |
| Repair and maintenance services | 995479 |
Valuation of Works Contract
GST is charged on the total contract value including the value of goods and materials used. There is no separate valuation for materials — the entire amount is treated as consideration for the composite service.
If the contract does not separately state the value of goods and services, the entire contract value is taxable at the applicable works contract rate.
🧮 Calculate GST on Your Contract
Use our free GST Calculator to instantly compute tax on your works contract value.
GST Calculator →Frequently Asked Questions
I am a civil contractor — do I need GST registration?
Yes, if your annual turnover from works contracts exceeds ₹20 lakh (since works contracts are services). Register immediately if your turnover approaches this limit.
My client is asking me to split the bill into labour and material — is that allowed?
Under GST, works contracts are treated as composite supply of services — splitting invoices into separate material and labour components is not recognised. The entire contract value attracts the applicable works contract GST rate.
I am a sub-contractor — what rate do I charge the main contractor?
Sub-contractors providing works contract services to the main contractor are taxable at 12% (if the main contract is for government original works at 12%) or 18% (for other contracts). The rate depends on the nature of the underlying contract.
Is GST on repair work the same as new construction?
No. New construction (original works) for government attracts 12% while repair and maintenance always attracts 18% regardless of whether the client is government or private.