The Rate Is 18%. Here Is Why That Number Is Right.
When you hire a build partner to construct a house on land you already own — materials, labour, design, supervision, all bundled together — that is called a works contract under Indian tax law.
Works contracts for residential construction are taxed at 18% GST under HSN/SAC Code 9954, governed by Section 2(119) of the CGST Act, 2017. Since both your build partner and project site are in Kerala, this is an intra-state supply. The 18% splits evenly: half to the Central Government, half to the Kerala Government.
Common Misconceptions
Why You Heard a Different Number
Three rates circulate in real estate conversations. All three are real. None of them apply to your build.
5%
"GST is 5% on residential"
Developer selling an under-construction flat or apartment. The developer holds the land and receives an abatement for it. Fundamentally different from your transaction.
1%
"Affordable housing is 1%"
Developer-sold units under Rs. 45 lakh with prescribed carpet area limits. No connection to a works contract on your own land.
12%
"Works contracts are 12%"
That slab was discontinued on 22 September 2025. If someone quotes it, they are working from outdated information.
The 5% rate applies to a developer selling you a flat — they hold the land, you are purchasing a unit from their inventory. Your situation is the opposite: you own the land, you are hiring expertise. Different transaction, different rate. They are not comparable.
Scope of Taxation
What Exactly Is Being Taxed?
Everything in the contract. Design fees. Supervision. All materials. All labour. Every inclusion you agreed to — electricals, plumbing fixtures (Jaquar, Grohe, or Kohler, per your specification), basic finishes, whatever is written into your agreement.
There is no deduction for land. The one-third land abatement you may have read about is a developer-side adjustment for flat sales. Your land is not part of your construction contract. It is already yours.
Rs. 1 cr
Contract value — design, materials, labour, supervision
+
Rs. 18 L
GST at 18% — deposited directly with the government
=
Rs. 1.18 cr
Total you pay across the full project
GST is not your build partner's income. They collect it and pass it directly to the government. Every rupee of those Rs. 18 lakhs goes to the Central and State governments.
Want to understand what 18% looks like on your specific project budget?
GST is not a single payment at the end. It is paid alongside each milestone throughout the project — spread in the same proportions as your contract payments, from day one.
Time of Supply — Section 13, CGST Act
GST becomes payable on whichever happens first: the invoice date, the date you make a payment, or 30 days after a milestone is completed.
From the very first advance, GST applies. Your build partner issues a Receipt Voucher for the advance, showing the 18% component, and deposits it with the government that month.
Example: You pay Rs. 5 lakh as MOU advance. GST component = Rs. 0.9 lakh. Total on day one = Rs. 5.9 lakh.
Milestone
% of Contract
Amount (Rs. 1 cr)
GST at 18%
You Pay
MOU / booking advance
5%
Rs. 5 L
Rs. 0.9 L
Rs. 5.9 L
Commencement / mobilisation
25%
Rs. 25 L
Rs. 4.5 L
Rs. 29.5 L
Plinth / DPC
15%
Rs. 15 L
Rs. 2.7 L
Rs. 17.7 L
Ground floor slab
15%
Rs. 15 L
Rs. 2.7 L
Rs. 17.7 L
First floor slab
15%
Rs. 15 L
Rs. 2.7 L
Rs. 17.7 L
Plaster complete
10%
Rs. 10 L
Rs. 1.8 L
Rs. 11.8 L
Tiling / finishes
10%
Rs. 10 L
Rs. 1.8 L
Rs. 11.8 L
Completion / handover
5%
Rs. 5 L
Rs. 0.9 L
Rs. 5.9 L
Total
100%
Rs. 1 cr
Rs. 18 L
Rs. 1.18 cr
By handover, the GST is already paid in full — distributed across the project in the same proportions as your payments. There is no large tax obligation waiting at the end.
GST Flow
Who Actually Pays the Government?
You never deal with the GST department. Not once. The flow is completely straightforward:
You
Pay contract value + 18% GST at each milestone
→
Build Partner
Deposits CGST and SGST with the government each month via GSTR-3B
→
Government
Receives the full 18% — 9% Central, 9% Kerala State
Your build partner handles all compliance, all filings, all reconciliation. From your side, it is a straightforward addition to each milestone payment.
Common Questions
Questions Homeowners Actually Ask
01Why am I paying 18% when my friend paid only 5% on their flat?
Your friend bought a flat from a developer. That is a different transaction entirely. The developer gets an abatement for the land value, and the applicable rate for under-construction flats is 5%. You are hiring a build partner to construct on land you own. Different transaction, different rate. They are not comparable.
02If I delay my payment, does the GST get delayed too?
No. Once a milestone invoice is raised, the GST is due in that tax month regardless of when you transfer the funds. The project timeline is what delays, not the tax.
03Can a build partner offer a deal without GST?
Registered build partners are required by law to charge and remit GST on works contracts. There is no legal pathway to omit it. Every invoice for construction services will reflect the 18% rate.
04Will I get any of the GST back?
No. Individual homeowners building a personal residence cannot claim Input Tax Credit. The GST you pay is a final cost. ITC flows up the supply chain to the build partner (who claims credit on materials purchased), but none of that flows to you.
05Why isn't GST shown inside the per-square-foot rate?
Because it is legally required to appear separately on every invoice. Folding it into the rate would make it impossible for you to verify what you are actually paying. Net contract value, plus a GST line item on every invoice — that is the only transparent way to do it.
06Did the September 2025 GST changes help me?
Yes, indirectly. Cement dropped from 28% to 18% GST, and bricks from 12% to 5%. On a standard quality home, this translates to roughly Rs. 25 to 40 per square foot in material cost savings. If your contract was quoted after September 2025, these savings are already reflected.
07Is stamp duty also GST?
No. Stamp duty and registration fees on your land or completed property are separate state-level charges. They are not GST. They apply independently and go to a different part of the government.
08I am an NRI. Does any of this change for me?
Nothing changes. GST on construction services is determined by where the project site is, not where you live. A site in Kerala means 18% GST (9% CGST + 9% SGST), same as for any resident Indian. Many NRI homeowners find the milestone-based structure straightforward to manage remotely.
09What if GST rates change while my project is running?
It happens rarely, but it did happen in September 2025. When rates change, the new rate applies to invoices raised after the changeover date. Invoices already paid at the old rate are not retroactively adjusted. Your contract should specify how mid-project rate changes are handled.
Have a question about your specific project? WhatsApp the Rzian team and we will walk you through it.
Before You Sign
The rate is fixed. The paperwork is not yours.
Every registered build partner constructing on your land charges 18% GST. The straightforward ones show it clearly on every invoice — itemised as CGST and SGST, with an HSN code you can verify.
Budget for GST at each milestone from day one, starting with the MOU advance. The Rzian team is available to walk through your specific numbers before you commit to anything.
This article is for general informational purposes only and is current as of the date of publication. GST rates and rules can change. For decisions specific to your project, consult a chartered accountant or refer to the latest CBIC notifications.