GST on Building Materials – Rates for Cement, Steel, Bricks & More

In 2025, Rahul, a young contractor in Lucknow, started construction on a duplex. He took notice of the following important GST rates when he was planning the cost of the materials: 28% for cement, 18% for steel and iron, 5% for sand, and 12% for prefabricated items. Brick types ranged from fly ash blocks at 12% to clay bricks at 5%. 

Rahul decreased his effective tax burden by about ₹1.5 lakh by keeping meticulous records of his invoices and claiming Input Tax Credit (ITC). His focus on GST compliance, informed by data from gst.gov.in, maintained the project's profitability and efficiency.

GST on Building Materials – Create a Table Mentioning Different Categories of Building Materials with Price and Applicable GST Rate
 

Types of Building Materials and Their GST Applicability
 

Clarification:

• Types refer to categories (e.g., “Cement-Based,” “Tiles and Ceramics”) rather than individual materials.
   
• GST rates are based on GST Council updates and HSN classification as of 2025. Rates may vary by specific material type and usage.

Impact of GST on the Building Materials Industry with Examples

Under the previous tax regime, many building materials were subject to lower taxes. For instance, cement was taxed at an effective rate of 31%, while fly ash bricks attracted a 5% VAT. Post-GST, cement is taxed at 28%, and fly ash bricks at 12%, leading to increased input costs for construction projects.

Read More – GST on Sand

Example: In Gujarat, unseasonal rains in May 2025 caused significant damage to brick manufacturing units, leading to losses of approximately ₹450 crore. The Gujarat Bricks Manufacturers' Federation has requested a reduction in GST on bricks from 12% to 5% to alleviate the financial strain on the industry.

Impact on Affordable Housing

The GST regime has introduced specific provisions for affordable housing projects. Under the Pradhan Mantri Awas Yojana (PMAY), affordable housing projects are subject to a reduced GST rate of 1% without the benefit of ITC. This initiative aims to promote housing for the economically weaker sections of society.

GST Impact on Building Materials:
 

Input Tax Credit (ITC) on Building Materials

GST allows for the seamless flow of Input Tax Credit (ITC), enabling builders to offset taxes paid on inputs against taxes collected on outputs. This mechanism reduces the overall tax burden and enhances cash flow for construction companies.

Example: Developers in the organised sector have reported marginal reductions in pricing due to the elimination of cascading taxes and the availability of ITC. For instance, the uPVC category is taxed at 18%, and aluminium at 28%, but the overall product pricing has become more competitive compared to the previous regime.

Challenges with Reverse Charge Mechanism (RCM):

The Reverse Charge Mechanism (RCM) under GST requires registered builders to pay tax on certain supplies received from unregistered suppliers. This provision can increase costs and complicate compliance, particularly for small developers.

Also Read - GST on Steel

Example: Developers must pay GST on services received from unregistered goods transporters, legal services, and services from government or local authorities. These taxes must be paid in cash, as they cannot be offset with ITC, potentially straining the finances of smaller construction firms.

Conclusion

GST has made the tax system simpler and clearer in the building materials sector. However, it has also caused some problems, such as higher input costs for certain materials and confusing rules under the Reverse Charge Mechanism. The overall impact varies by industry. Larger, organised companies usually benefit because they can claim Input Tax Credit (ITC). In contrast, smaller developers often face cash flow difficulties and complex compliance requirements.

FAQs Related to GST on Building Materials

Q. What is the GST rate on cement?

Cement is taxed at 28% GST, one of the highest rates among building materials.

Q. Are bricks taxed under GST?

Yes, bricks attract 5% to 12% GST depending on their type (e.g., fly ash bricks at 5%).

Q. Can builders claim input tax credit (ITC) on building materials?

Yes, but only for commercial construction; ITC is not allowed for residential construction sold before completion.

Q. Is sand taxable under GST?

Yes, natural sand attracts 5% GST.
 

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