GST 2.0 on Building Materials: What It Changed for Homes

Ten percentage points. That is how much the GST on a bag of cement fell on 22 September 2025, when the rate rationalisation that the government and the trade began calling "GST 2.0" came into force. For eight years cement had sat in the top 28 per cent slab alongside luxury goods, and every house, compound wall and RCC slab in the country carried that tax. Overnight it dropped to 18 per cent. Stone blocks, sand-lime bricks and bamboo flooring fell to 5 per cent, and air-conditioners joined cement in moving from 28 to 18.

Homeowners then heard two opposite stories. One said that building had become dramatically cheaper; the other said that nothing had changed because interior quotes looked the same as before. Both are half right. The reform cut tax sharply on a few heavy structural materials, but most of the finishing materials that make up an interior quote — paint, tiles, plywood, sanitaryware, glass, wires, switches, lamps, furniture — had already been brought down to 18 per cent in 2017 and 2018, and they stayed there. This guide separates the two, using only the rates published by the GST Council and the Press Information Bureau, and shows what the change is actually worth on a house, a flat purchase and an interior project. It is general information for budgeting, not tax advice; a chartered accountant should confirm the rate on any specific invoice.

What changed on 22 September 2025

The GST Council approved the changes at its 56th meeting on 3 September 2025, and the new rates applied from 22 September 2025. The headline was structural: the old four-slab system of 5, 12, 18 and 28 per cent was collapsed into two main rates — a merit rate of 5 per cent and a standard rate of 18 per cent — with a special 40 per cent rate kept for a short list of demerit goods such as tobacco products, aerated drinks and larger cars and motorcycles. No building material was placed in the 40 per cent list. In practice that meant anything used in construction that had been at 28 per cent came down to 18, and several items that had been at 12 per cent went down to 5.

To see why cement was the big story, it helps to look back. When GST began on 1 July 2017, many building and interior goods sat at 28 per cent: cement, ceramic tiles, sanitaryware, plywood and particle board, glass, wires and switches, paint, furniture and mattresses among them. In November 2017 the Council moved a long list of these — tiles, sanitaryware, plywood, boards, glass, wires, switches, lamps, wallpaper, marble and granite slabs, furniture and mattresses — down to 18 per cent. In July 2018 paints and varnishes followed. Cement was the notable holdout, and it stayed at 28 per cent until GST 2.0. Separately, from 1 April 2019 the tax on new residential flats was restructured to 1 per cent for affordable housing and 5 per cent for other homes, without input tax credit. Fig. 1 puts these steps on one line.

Before and after: rates on building materials

The table below lists only the construction-related changes that appear in the official GST Council and PIB material for the September 2025 reform. It is deliberately short. Many websites published longer lists within days of the announcement, and several of them showed items such as tiles or plywood "falling from 28 to 18 per cent" in 2025 — but those items had already been at 18 per cent since November 2017. Where a material is not in this table, the safest assumption is that its rate did not change in 2025, and the invoice HSN code should be checked.

Materials that stayed at 18 per cent

Most of what a homeowner sees and touches after the structure is finished was untouched by GST 2.0, because it had already been brought down years earlier. The November 2017 changes moved ceramic tiles of all kinds, sanitaryware, plywood and particle and fibre boards, wooden articles and frames, glass and mirrors, wires, cables, switches and sockets, lamps and light fittings, wallpaper, marble and granite slabs and tiles, and furniture, mattresses and bedding from 28 to 18 per cent. Paints, varnishes, enamels and putty-type products, together with storage and immersion water heaters, followed in July 2018. With the 28 per cent slab now gone for everything except the 40 per cent demerit list, these items simply remain in the 18 per cent standard rate.

Steel is the other large structural input, and it was already in the 18 per cent slab before September 2025; it was not part of the 2025 changes. That matters for anyone estimating a house, because steel and cement together make up a large share of the structural material bill. Only one of the two became cheaper in tax terms.

What the cement cut is worth on a house

Cement does not appear as a separate line in most homeowners' minds, but it runs through every stage of a building: footings, columns, beams and slabs, block or brick masonry, internal and external plaster, flooring beds, and compound walls. The useful question is not "how much cheaper is cement?" but "how much of my project is cement, and how much tax did that portion carry?" The worked example below uses round figures as an illustration. The cement value should be taken from the contractor's bill of quantities or the actual purchase bills for each project, because it varies with structure, number of floors and design.

On these assumptions the cement cut is worth about ₹30,000 on a ₹44–56 lakh house — real money, but well under one per cent of the total. A bigger or heavier building, a basement, a raft foundation or a long compound wall will push the cement share up and the saving with it; a modest single-storey home will see less. The point of the exercise is to stop two mistakes: assuming the reform has made construction dramatically cheaper, and assuming it has done nothing at all.

Who actually pockets the saving

For a family building its own house, the saving reaches them only if the contractor or dealer reduces the tax-inclusive price. A homeowner cannot claim input tax credit on materials or works contracts used to construct their own house — the CGST Act blocks credit for construction of immovable property on one's own account — so whatever GST is charged is a final cost. That makes it worth checking the cement line of every bill raised after 22 September 2025. Where a contractor quoted a lump-sum rate per sq ft before the change and is building after it, the contract terms decide who benefits; a clause that says rates are "inclusive of taxes as applicable" is worth discussing openly rather than assuming.

Interior projects: why quotes barely move

An interior quote is built almost entirely from items that were already at 18 per cent: plywood and boards, laminates and veneers, hardware, glass, tiles, paint, wires, switches, lamps and furniture. A fit-out by an interior firm is normally billed either as a works contract for the whole job or as separate supplies and services, and in both cases the usual GST on the invoice for a home interior is 18 per cent. Design fees are a service and also carry 18 per cent. None of that moved in September 2025. The table shows how GST sits on top of the Surat 2BHK bands used across this site, which are quoted before GST.

There are three places where an interior budget does feel GST 2.0. First, air-conditioners: split units moved from 28 to 18 per cent, so a household buying three or four units at the same time as its interiors sees a real saving on that line. Second, a large television above 32 inches and a dishwasher, both of which also moved from 28 to 18. Third, any civil work inside the interior job — a new partition in blocks, re-plastering, a raised floor bed or a kitchen platform base — uses cement, and that portion of the material bill now carries less tax. Bamboo flooring and bamboo joinery and stone inlay work are niche, but where they are chosen they now attract 5 per cent.

Buying a flat: where GST sits in the price

For flat buyers the reform changed less than the headlines suggested, because the GST on a new home is not charged on materials at all. Since 1 April 2019, the construction of residential apartments in a project has been taxed at 1 per cent for affordable housing and 5 per cent for other housing, without input tax credit for the builder. Affordable housing in this scheme means a carpet area of up to 60 sq m in metropolitan cities or 90 sq m elsewhere, with a value of up to ₹45 lakh. Because the builder cannot take credit for the GST paid on cement and other inputs, those taxes are part of the builder's cost. A lower rate on cement therefore reduces the builder's cost; whether it reduces the flat's price depends on the builder and the market, not on any automatic rule.

Two practical points follow. A buyer comparing an under-construction flat with a completed one should compare like with like: the GST on the under-construction home is a real additional cost, while the completed home carries no GST but may carry a higher base price. And neither choice affects the 18 per cent that will later be paid on the interiors. The comparison of timing and interior cost between the two kinds of flat is covered in detail in this site's guide to ready-to-move and under-construction homes.

Reading invoices and passing on the cut

The lower rate helps only if it appears on the bill. A GST invoice from a registered dealer or contractor should show the supplier's GSTIN, the HSN or service accounting code, the taxable value, and the tax split into CGST and SGST for a sale within Gujarat, or IGST for an inter-state sale. For cement after 22 September 2025, the combined rate should read 18 per cent — 9 per cent CGST plus 9 per cent SGST within the state. Any invoice still showing 28 per cent on cement after that date deserves a question.

For contractors and interior firms, the question is usually not the rate on their own invoice — which stays at 18 per cent for most interior work — but whether their purchase cost for cement-based work fell and whether that was reflected in their rate. On a pure interior job the answer is "very little", and a homeowner should not expect a lower per-sq-ft rate for wardrobes or kitchens because of GST 2.0. On a civil or turnkey job with significant masonry, plaster or RCC, it is reasonable to ask how the cement saving has been treated for work done after 22 September 2025.

For businesses fitting out offices and shops

A registered business doing a fit-out is in a different position from a homeowner, because it may be able to claim input tax credit on some purchases. Credit is generally blocked for works contracts and goods used to construct immovable property on the business's own account, which usually covers built-in work that is capitalised as part of the building, while movable furniture and equipment such as loose desks, chairs and air-conditioners are treated differently. The boundary depends on facts and accounting treatment, so the line between "built-in" and "movable" should be agreed with the business's chartered accountant before the quote is split into items.

Where GST on construction is heading

The direction of travel since 2017 has been consistent: fewer slabs, and building materials pulled out of the luxury bracket. With cement at 18 per cent, almost every mainstream construction and interior material now sits at either 5 or 18 per cent, which makes estimating simpler and reduces the number of disputes about classification. Several questions remain open and are worth watching rather than predicting. The real-estate rates of 1 and 5 per cent without input tax credit leave builders unable to recover the GST they pay on inputs, which is why a rate cut on cement does not automatically change flat prices. Electricity, petrol and diesel — which affect transport and site costs — remain outside GST. And the Council continues to review the rate structure, so any budget prepared today should list GST separately, so that it can be updated if a rate changes before the work is billed.

Ten rules for budgeting with GST 2.0

• Treat GST 2.0 as a cement and appliance story; do not expect lower rates on tiles, plywood, paint, sanitaryware or wiring, which were already at 18 per cent.
• Ask every dealer and contractor whether quoted rates include GST, and write the answer into the quote.
• For a house, pull the cement value out of the bill of quantities and calculate the saving yourself: tax at 18 per cent instead of 28 per cent on that value.
• Check cement invoices dated on or after 22 September 2025 for 9 + 9 per cent (or 18 per cent IGST), not 14 + 14 per cent.
• For contracts signed before the change but billed after it, read the tax clause and agree in writing how the cement saving is treated.
• Budget 18 per cent on top of interior quotes and design fees that are stated before GST.
• Buy air-conditioners, large televisions and dishwashers with the interior budget in mind; these moved from 28 to 18 per cent.
• When comparing an under-construction flat with a completed one, include the 1 or 5 per cent GST on the under-construction price.
• Keep every GST invoice; they matter for warranties, disputes and, for businesses, for any credit that may be available.
• Ask a chartered accountant before relying on a rate for a business fit-out or an unusual material; this guide is general information, not tax advice.

Frequently asked questions

What is the GST on cement now?

18 per cent, from 22 September 2025. It was 28 per cent from the start of GST in July 2017 until then. Within a state the invoice shows 9 per cent CGST and 9 per cent SGST; an inter-state purchase shows 18 per cent IGST.

Did GST on tiles and plywood come down in 2025?

No. Ceramic tiles, plywood, particle and fibre boards, sanitaryware, glass, wires, switches and furniture were moved from 28 to 18 per cent in November 2017, and they remain at 18 per cent. Lists that show these items falling in 2025 are comparing with the original 2017 rate.

Is GST on paint 18 or 28 per cent?

18 per cent. Paints, varnishes and enamels were cut from 28 to 18 per cent by the GST Council in July 2018 and were not changed by GST 2.0, which is why painting quotes did not move in September 2025.

Does GST 2.0 make an under-construction flat cheaper?

Not automatically. The GST on the flat is still 1 per cent for affordable housing and 5 per cent for other homes, without input tax credit. The cement cut lowers the builder's cost, but whether that is passed on in the price per sq ft is a commercial decision. A completed flat sold after the completion or occupancy certificate carries no GST on the sale.

How much GST is charged on interior design work?

For a home interior, a registered firm usually charges 18 per cent on the works contract or on the separate supplies and services, and 18 per cent on design fees. GST 2.0 did not change these rates. A small unregistered contractor will not charge GST, but their price already includes the tax they paid on materials.