GST exemption for construction services

In general, GST is chargeable to almost all supply of services supplied by a taxable supplier to a recipient of services. Government through notifications has exempted certain specific services on satisfying certain conditions. We have written different articles to help you understand such services which are exempted from GST. You can find links to those articles below in this post. In this article we will be discussing certain construction services exempted from GST based on the notifications issued by the government.

Construction services for Pradhan Mantri Awas Yojana

Pradhan Mantri Awas Yojana or PMAY is a programme launched by the government of India to provide housing for All by the year 2022. As per entry 10 of the notification number 12/2017, services provided by way of pure labour contracts of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works pertaining to the beneficiary-led individual house construction or enhancement under the Housing for All (Urban) Mission or Pradhan Mantri Awas Yojana

The term original works means all new constructions;

(i) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable;

(ii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise.

GST exemption for Construction services to single residential unit

Another most important GST exemption is for a single residential unit otherwise than as a part of a residential complex.

As per entry 11 of notification number 12/2017, 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 is exempted from GST. 

Residential complex means any complex comprising of a building or buildings, having more than one single residential unit. Single residential unit means a self-contained residential unit which is designed for use, wholly or principally, for residential purposes for one family.

Therefore, services by way of pure labour contracts of construction, erection, commissioning, or installation of original works pertaining to self-contained residential units which is designed for use, wholly or principally, for residential purposes for one family and which are not part of a residential complex are exempt from GST.

In addition to above two construction services, the notification has also exempted following two services from GST.

  • Services supplied by electricity distribution utilities by way of construction, erection, commissioning, or installation of infrastructure for extending the electricity distribution network upto the tube well of the farmer or agriculturist for agricultural use.
  • Supply of TDR, FSI, long term lease (premium) of land by a landowner to a developer are exempted subject to the condition that the constructed flats are sold before issuance of completion certificate and tax is paid on them.

Exemption of TDR, FSI, long term lease (premium) shall be withdrawn in case of flats sold after issue of completion certificate, but such withdrawal shall be limited to 1% of value in case of affordable houses and 5% of value in case of other than affordable houses.

is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.