Construction Services HSN Code 9954: GST Rate, SAC Code & Work Contract Rules

Construction businesses, contractors, and service providers need to use the correct SAC code while preparing GST invoices for construction-related services. SAC Code 9954 is used for various construction services, including residential construction, commercial buildings, industrial projects, and other related works.

Understanding the correct HSN Code 9954 GST rate, applicable SAC classification, and works contract rules helps businesses avoid invoice errors and ensure GST compliance.

In this guide, we explain the 9954 HSN code description, GST rates, SAC sub-codes, works contract classification, ITC applicability, and how to mention construction service details in GST invoices.

What is HSN Code 9954?

HSN Code 9954 applies to “Construction Services of Buildings”, including all types of residential, commercial, industrial, and non‑residential buildings. This category covers construction contracts for apartments, offices, hotels, educational and institutional buildings, factories, warehouses, and various building renovation, repair, maintenance, and additions. Work contracts under this SAC play a central role for builders, contractors, developers, and promoters in GST compliance.

In simple terms, if your business is engaged in construction or works contracts related to building development, renovation, repair, or maintenance, it typically falls under HSN/SAC 9954.

SAC Code 9954 Classification for Construction Services

Construction services under GST are classified under SAC Code 9954. Depending on the type of construction activity, different SAC categories are used.

The correct SAC code depends on the nature of the project, such as residential construction, commercial construction, industrial construction, or repair work.

Businesses should select the SAC code that accurately represents the service provided instead of using a general construction classification.

Difference Between HSN Code 9954 and SAC Code 9954

Although people commonly search for HSN Code 9954, construction services under GST are technically classified using SAC (Service Accounting Code).

Since construction activities are services, businesses generally use SAC Code 9954 while creating GST invoices.

GST Rates Applicable Under 9954

(Rates updated as per GST framework effective 22 September 2025 and applied in 2026.)

GST Rates & Exemptions for HSN Code 9954 (FY 2026)

Under the current GST framework applicable in FY 2026, multiple GST slabs apply to construction services and work contracts under HSN 9954. The applicable rate depends on the type of project, client category, and Input Tax Credit (ITC) eligibility.

Key changes since the GST rationalisation effective 22 September 2025 include:

• The standard GST rate for most construction services is 18% with ITC.
• Concessional GST at 1% or 5% (without ITC) applies to residential construction projects that meet specific criteria.
• GST slabs are determined by conditions such as affordable housing eligibility, project type, and scheme notification.

Key Highlights for 2026

• Standard Construction & Work Contracts: 18% GST (with ITC)
• Affordable Residential Housing: 1% GST (without ITC)
• Other Residential Under‑Construction Properties: 5% GST (without ITC)

No compensation cess applies to construction services under normal GST classifications.

Table Notes

The GST rates reflect the government’s rationalisation for construction services and work contracts:

• 1% and 5% rates are generally valid for residential properties that meet certain government criteria for housing affordability.
• 18% rate with ITC applies to most commercial, industrial, and non‑affordable residential projects.

ITC eligibility and invoice management rules differ based on the GST slab and transaction type.

What’s Included in HSN 9954 Services?

Under HSN 9954, construction and work contract services cover:

• New building construction of residential, commercial, and industrial projects
• Apartment and housing complex development
• Office setups, factories, warehouses, malls, hotels, and hospitals
• Educational, institutional, religious, and cultural buildings
• Renovation, maintenance, repair, remodeling, and additions to existing buildings
• Civil structure alterations and enhancements

These services provide a uniform framework for GST compliance, billing, and credit eligibility across India’s construction sector.

Explore Gimbooks HSN/SAC code & GST Rate finder

Key Exemptions Under GST for 9954

While no general exemption exists for all construction services, certain categories follow lower GST rates or exemptions:

• Affordable housing projects that meet specific criteria (e.g., carpet area limits, price thresholds) can attract 1% or 5% GST without ITC.
• Government or public‑sector projects may receive concessional or zero GST if notified under government schemes.
• Services linked to certified events or state government initiatives may receive special treatment under GST notifications.

Works Contract Under SAC Code 9954

A works contract under GST refers to a contract where the supply involves both goods and services and is related to activities such as construction, installation, repair, renovation, or modification of immovable property.

Construction-related works contracts are generally classified under SAC Code 9954 depending on the nature of the service.

Examples of construction works contracts include:

• Construction of commercial buildings
• Development of residential projects
• Installation and related construction activities
• Repair and renovation contracts involving materials and labour

While selecting the correct SAC code, businesses should evaluate the actual nature of the contract rather than selecting a code only based on the type of customer or project.

Input Tax Credit (ITC) Rules for Construction Services

ITC eligibility for construction services under HSN 9954 is governed by current GST norms:

ITC Eligibility

You may claim ITC for:

• Goods and services used in projects taxed at 18% with ITC (e.g., commercial and industrial buildings).
• Construction inputs procured by registered builders/developers for taxable projects.

ITC Not Allowed

ITC is restricted or unavailable for:

• Residential construction billed at 1% or 5% GST (without ITC).
• Residential projects not intended for further taxable supply.
• Unregistered suppliers’ inputs may trigger reverse charge GST at applicable rates.

Example: If a developer incurs costs on materials and services for an 18% GST‑taxed commercial project, full ITC can be claimed against output tax liability under GST rules.

Check - Latest GST Rates in India 2026

GST on Work Contract Billing: Practical Scenarios

• Affordable residential project: A developer bills at 1% GST (without ITC) if criteria for affordable housing are met.
• Commercial project: A builder constructing an office complex charges 18% GST with full ITC on inputs and services.
• Government institutional project: Services may attract 5% GST (without ITC) if notified under public policy schemes.

Common Mistakes in Construction GST Filing

• Misclassifying building types and applying incorrect GST slabs.
• Ignoring supplier registration percentages required for ITC eligibility.
• Incorrect reverse charge application for unregistered inputs.
• Failing to segregate input credits project‑wise, risking audit issues.
• Using outdated GST rates or pre‑September 2025 benchmarks.

Proper categorization under HSN Code 9954 minimizes audit flags, penalties, and unnecessary tax liabilities.

Related - Labour Charges HSN Code 9985

How to Mention SAC Code 9954 in GST Invoice

When issuing a GST invoice for construction services, contractors should include accurate service details along with the applicable SAC code.

A construction service invoice generally includes:

• Description of construction service provided
• Applicable SAC code
• Quantity or service value
• GST rate applied
• CGST, SGST, or IGST details depending on the transaction

Example:

Service Description: Commercial building construction service
SAC Code: 9954
GST Rate: Applicable rate based on service category

Using the correct SAC classification helps businesses maintain accurate GST records and avoid compliance issues.

Conclusion

Choosing the correct SAC Code 9954 for construction services helps contractors, builders, and businesses maintain accurate GST invoices and avoid classification errors.

Before issuing invoices, businesses should verify the applicable construction service category, GST rate, and ITC conditions. Understanding the difference between HSN and SAC codes also ensures better GST compliance.

Also check

• Bricks HSN Code 6901
• Service Charge HSN Code 9983
• Cloth HSN Code 5208
• Furniture HSN Code 9403
• Maintenance, Repair & Installation Services – 9987 HSN Code and GST rate

FAQs

What is SAC Code 9954?

SAC Code 9954 is the GST classification code used for construction services, including residential, commercial, industrial, and other construction-related activities.

Is HSN Code 9954 used for construction services?

Construction services are classified using SAC codes under GST. Although commonly searched as HSN Code 9954, the correct classification for services is SAC Code 9954.

What is the GST rate for SAC Code 9954?

The GST rate for SAC Code 9954 depends on the type of construction service and applicable GST rules for that category.

Is works contract covered under SAC Code 9954?

Yes, construction-related works contracts are generally classified under SAC Code 9954 depending on the nature of the service provided.

Which SAC code should contractors mention in GST invoices?

Contractors should mention the SAC code that matches the exact construction service provided, such as residential, commercial, industrial, or repair-related construction work.