GST on Construction & realestate

[Sangeetha D]

GST Implications for Construction Contracts and Property Sale - Comprehensive Query

Background:
Mr. A is an engineer undertaking individual house construction projects under different business models:

Case 1: Works Contract (Materials + Labor)
• Purchases all construction materials in his name
• Charges clients per square foot.
• Q: Is this service taxable or exempt under GST?

Case 2: Pure Labor Service (Client Supplies Materials)
• Only provides construction labor
• Client supplies all materials
• Q: Is this service taxable or exempt under GST?

Case 3: Land Purchase + Construction + Sale
• Purchases land in his name
• Constructs complete house 
• Sells completed property
• Q: Is this service taxable or exempt under GST?

[Sadanand Bulbule]

Refer the following:

2025 (4) TMI 549 - KARNATAKA HIGH COURT - M/S. ROHAN CORPORATION INDIA PVT LTD., VERSUS UNION OF INDIA, THE COMMISSIONER OF CENTRAL EXCISE & CENTRAL TAX (GST) MANGALURU, THE ASSISTANT COMMISSIONER OF CENTRAL EXCISE & CENTRAL TAX, MANGALURU, SHRI SANJAY KUMAR MISHRA, LIQUIDATOR FOR LOTUS SHOPPING CENTERS PVT. LTD., THE ASSISTANT COMMISSIONER OF COMMERCIAL TAXES MANGALURU.

 

 

[Shilpi Jain]

First case 18%, 

2nd case if only supply of labour 18% but if services by way of pure labour contracts of construction, erection, commissioning, or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex - 0%

3rd case - possibility of 5%. 

AI Summary

GST on construction contracts: taxability varies by contract type-works taxable, pure labour sometimes exempt, property sale reduced rate. Query addresses GST treatment for (1) works contracts where builder purchases materials and charges per square foot, (2) pure labour contracts where client supplies materials, and (3) land purchase, construction and sale of completed property. Expert replies reference a Karnataka High Court decision and state that works contracts are taxable, pure labour services are generally taxable but pure labour construction for a single residential unit otherwise than as part of a residential complex may be exempt, and sale of newly constructed property may attract a lower GST charge.