HSN Code for Works Contract and Construction Services

A works contract has no HSN code, because a works contract is a service. Schedule II to the CGST Act settles that explicitly, and the code you need comes from heading 9954 — construction services — with a six-digit line chosen by what is actually being built. The reason people search for an HSN is that the contract obviously involves goods: cement, steel, tiles, cable. Under GST that no longer matters. The whole contract value is service, and the goods disappear into it.

What a works contract legally is

Section 2(119) of the CGST Act defines a works contract as a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods, whether as goods or in some other form, is involved in the execution of the contract.

Read that as a two-part test. Remove the immovable property and it is not a works contract — fabricating a machine in your workshop is a supply of goods or job work, however much welding is involved. Remove the transfer of goods and it is not a works contract either — a labour-only construction contract is still a construction service under 9954, but it is not a works contract, which matters for the exemption entries discussed in our note on labour charges.

Heading 9954: the construction service codes

Service accounting codes are built on their own hierarchy — chapter 99, then a four-digit heading, a five-digit group and a six-digit service code. Heading 9954 is construction services, and it is one of the most finely subdivided headings in the whole scheme, which is a gift: there is almost always a code that describes the work precisely, so a residual code is rarely the right answer.

The six groups under 9954

A main contractor building a commercial block bills 995414. The electrical sub-contractor on the same site bills 995461, the tiling sub-contractor 995474, and the scaffolding supplier 995457. Each supply takes its own code; none of them inherits the main contract's.

"Civil work with material" and the composite supply rule

A very common search is for the code for "civil construction work with material", on the assumption that supplying material changes something. It does not change the code. Under Schedule II the contract is a composite supply of service in its entirety, and the material is consumed inside that single supply.

What it does change is the character of the contract: material is what makes it a works contract rather than a pure service contract, and that is what brings Section 17(5) into play for the recipient. So the answer to "with material or without?" affects the customer's credit position far more than it affects your code.

Interior work, fabrication and the immovable property test

The immovable property test does real work in fit-out and fabrication contracts:

• Fixed interior work — false ceilings, wall panelling, built-in storage fixed to the structure, flooring, permanent partitions — is generally treated as work on immovable property and falls in the finishing group 99547, or in 995476 for joinery and carpentry.
• Loose furniture designed, made and delivered is a supply of goods under the relevant chapter of the tariff — Chapter 94 for most furniture — even if the same contractor also does the fit-out.
• Structural steel fabricated and erected on site is a works contract under 995455. The same steel fabricated in a workshop and sold as sections is a supply of goods under Chapter 73, and fabricating a customer's own steel is job work under 9988 — see our guide to job work.
• Plant and machinery erected on a foundation occupies contested ground. Whether a particular installation is immovable property has generated a long line of authority, and the answer turns on permanence and the intention behind the fixing.

The ITC block that decides the economics

For most parties to a construction contract the rate is the second question. The first is whether the tax is recoverable, and Section 17(5) frequently says no:

• Clause (c) blocks credit on works contract services for construction of immovable property, except where the input service is used for making a further onward supply of works contract service. This is why the contractor and sub-contractor chain works, and why the end owner is the one who bears the cost.
• Clause (d) blocks credit on goods or services received for construction of immovable property on your own account, and says so even where the property is used in the course or furtherance of business.

Both clauses carve out plant and machinery, and both are read with an explanation that treats reconstruction, renovation, additions, alterations and repairs as construction to the extent the expenditure is capitalised. The capitalisation test is the practical dividing line in most disputes. Our input tax credit guide sets out the wider framework, and the note on cement and construction materials covers the goods side.

Rates

Construction service rates have a complicated history — affordable housing entries, a shift to lower rates without input tax credit for real estate projects, government-contract entries that were subsequently withdrawn, and the 2025 rate rationalisation on top. Several of the entries carry conditions rather than a plain rate. This article therefore does not reproduce them: read the current entry for your specific code and circumstances on the CBIC GST portal, and see our overview of the current rate slabs for the structure.

Invoicing and vendor checks

Construction runs on long sub-contractor chains, running bills and retention money held for months.

1. Use the specific six-digit code for the trade you are performing, not 9954 at the heading level. The subdivisions exist and departmental systems read them.
2. Match the code to the contract, and keep the contract retrievable. Running account bills raised over two years will be read against the agreement, not against each other.
3. Verify sub-contractors continuously, not once. On a two-year project a sub-contractor's registration can be suspended or cancelled between the first running bill and the last, and credit taken on their invoices after that point is exposed. Periodic re-checking of the vendor master against live registration data — see automated vendor monitoring — catches it while the retention money is still in your hands.

Frequently asked questions