GST for contractors

GST Filing for Contractors

GST compliance for contractors and builders — works contracts, running bills, advances and GST TDS, handled correctly.

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Written by Tax Paramarsh editorial teamReviewed by Tax Paramarsh GST deskLast updated 3 October 2026Rules as in force on 3 October 2026

In a typical month, you deal with

  • Running-account (RA) bills raised on clients
  • Mobilisation advances and retention money
  • Sub-contractor and labour bills
  • Material bought for sites
  • GST TDS deducted by government clients
The basics

How GST works for contractors

A contract that combines materials and labour to build, repair or install something on immovable property is a works contract, and GST treats it as a service. You charge GST on each running bill, including the part held back as retention, and GST on advances is due when you receive them. Government departments deduct GST TDS from your payments, which you must accept on the portal to use as credit. As a contractor supplying works contracts you can generally claim credit on materials and sub-contracts used for that work. Rates depend on the type of work and client, and we check each contract against the current notifications.

Records

What data should you maintain?

Billing
  • Running-account (RA) bills and final bills
  • Work orders and contract terms
  • Advances received
  • Retention amounts
  • Credit and debit notes
Costs
  • Material purchase bills
  • Sub-contractor invoices
  • Machinery hire and transport bills
  • Labour supply invoices
GST records
  • GSTR-1 and GSTR-3B
  • GSTR-2B and IMS actions
  • GST TDS credits from government clients
  • E-way bills for material moved to sites
Every month

Your monthly GST workflow

  1. RA bills & advances
  2. Material & sub-contract bills
  3. GSTR-2B
  4. Reconciliation
  5. GST TDS credits
  6. GSTR-1
  7. GSTR-3B
  8. Filing
  9. GST report
Avoid these

Common GST mistakes

GST not paid on advances

For services, GST is due when an advance is received — not when the work is billed later.

Retention left out of the taxable value

GST is payable on the full invoice value, even on the part the client holds back as retention.

GST TDS credit not accepted

TDS deducted by government clients reaches your cash ledger only after you accept it on the portal.

Wrong rate for the contract type

Works contracts for different clients and types of work can carry different rates — billing at the wrong one is costly to correct.

Sub-contractor credit not tracked

If sub-contractors don’t file, their invoices don’t reach your GSTR-2B and you can’t claim the credit.

Projects in another state

For work on property in another state, the place of supply is where the property is — check the GST treatment before billing.

Free GST checklist

What should you send every month?

Choose your business type. This is the data a good GST process starts with.

Your monthly GST data checklist

    Download this checklist

    Get it as a file to share with your team or accountant.

    How Tax Paramarsh helps

    • Prepare RA bills’ GST treatment, including advances and retention
    • Track GST TDS credits and accept them on the portal
    • Reconcile material and sub-contractor bills with GSTR-2B
    • Prepare GSTR-1 and GSTR-3B — you approve, we file
    • Check the rate and place of supply for each new contract

    Pricing

    Most contractors need the Standard (₹599/month) plan; firms with many sites or sub-contractors move to Pro (₹999/month). Plus 18% GST. Basic covers up to 10 invoices a month, Standard 11–50 and Pro 51–200 — with turnover up to ₹50 lakh for Basic and Standard, and ₹1 crore for Pro. Pay yearly and get 12 months for the price of 10.

    See all GST plans →

    Common questions

    What is GST TDS?

    Government departments, local authorities and certain public bodies deduct 2% (1% CGST + 1% SGST, or 2% IGST) from payments under contracts above ₹2.5 lakh. It appears as a credit you accept on the portal and then use to pay GST.

    Is GST payable on mobilisation advances?

    Yes. For services, including works contracts, GST becomes payable when you receive an advance. It is adjusted when the final invoice is raised.

    Is GST charged on retention money?

    Yes. GST is charged on the full value of the RA bill, even though the client holds back part of the payment as retention.

    Can a contractor claim input tax credit?

    Generally yes, on materials, sub-contracts and services used to supply works contract services. Your client usually can’t claim credit for construction of its own building.

    Do I need an e-way bill to move material to a site?

    Generally yes, when the consignment is worth more than ₹50,000, subject to the state’s rules for movement within the state.

    Often needed alongside GST

    Project accountingSite-wise costs and billingTDS returnsIncome-tax TDS on your sub-contractor paymentsEPF & ESIFor site workers and staffBank guarantees & loansWorking capital for projects

    GST for other industries

    RetailersTraders & WholesalersManufacturersRestaurantsE-commerce SellersService Businesses

    Let us manage your contracts’ GST every month.

    Accurate data, reconciled credit, filed on time.

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