Works Contract HSN Code & GST Rate: SAC 9954 Complete Guide

Published: 25 July 2026 | Last reviewed: 25 July 2026 | 8 min read
Reviewed by: GetMyCA GST Advisory Team, Chartered Accountants | Fact-checked against CBIC Notification No. 11/2017-Central Tax (Rate) and the CGST Act, 2017

Quick Answer

Many people search for "works contract HSN code," but under GST, works contract is usually classified as a service under SAC 9954, not a goods HSN code. Most standard works contracts are taxed at 18% GST, though the final rate depends on the project type, recipient, and applicable notification.

At a Glance

Who Should Read This Guide

• Civil contractors and building contractors
• Builders and real estate developers
• Interior fit-out and renovation contractors
• Contractors working on government and infrastructure projects
• GST consultants and accountants handling construction-sector clients
• Businesses receiving works contract invoices who need to verify the classification before claiming ITC

Works Contract HSN Code / SAC Code - What It Actually Is

Under GST, goods are classified using HSN (Harmonised System of Nomenclature) codes, while services are classified using SAC (Service Accounting Code). A works contract - because it legally counts as a supply of service, not a sale of goods - is classified under SAC, even though most people continue to search for it as an "HSN code."

Technically, 9954 is a service classification (SAC) under GST, not a goods HSN code - many businesses and even some invoicing tools casually label it "HSN 9954," but the GST law itself treats it as a Service Accounting Code because works contract is deemed a supply of service under Schedule II of the CGST Act.

For construction-related works contracts involving immovable property, the relevant classification is SAC 9954 (Construction Services). This heading covers residential, commercial, industrial, and civil engineering construction, along with repair, alteration, renovation, and maintenance work on existing structures.

Why this matters: Using an HSN code (meant for goods) instead of the correct SAC code on an invoice can create mismatches during GST return filing and refund processing - one of the most common documentation errors we see in practice.

What Is a Works Contract Under GST?

A works contract has a specific legal definition under Section 2(119) of the CGST Act, 2017 (source: taxinformation.cbic.gov.in) - it is not just any construction-related job. It means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration, or commissioning of any immovable property, where the contract also involves transfer of property in goods (materials) during execution.

Two conditions must both be true for a contract to count as a works contract under GST:

• The work must relate to immovable property (land, buildings, or things permanently attached to the earth) - work on movable property, like repainting a vehicle, does not qualify.
• The contract must involve both goods and services together - a contract for pure labour with no material transfer is not a works contract in the GST sense.

Under Schedule II of the CGST Act, a works contract (as defined above) is deemed to be a supply of service - which is exactly why it takes an SAC code, not an HSN code.

GST Rate on Works Contract

In most cases, works contract services under GST fall under SAC 9954 and are taxed at 18% (9% CGST + 9% SGST, as per CBIC Notification No. 11/2017-Central Tax (Rate), dated 28 June 2017), but the final applicable rate can depend on the nature of the work, the recipient, the specific notification category, and the type of project involved.

Important: Do not assume any concessional category without checking the current notification. Most standard works contract services are taxed at 18%, while a few specifically notified categories may have separate treatment. Always verify your project category against the latest CBIC notification before finalising the rate on an invoice.

Which SAC Code Should Contractors Use? - Quick Reference

SAC 9954 Sub-Codes - Which One Applies to Your Contract

SAC 9954 is a broad heading with detailed six-digit sub-codes underneath it. Using the specific sub-code that matches your actual work - instead of just writing "9954" - makes your invoicing and GST filings more precise and easier to defend during scrutiny. These sub-codes are taken directly from the CBIC's official Annexure: Scheme of Classification of Services.

Practical tip: Most invoicing software and GST portals will accept the broad 9954 code, but where 6-digit HSN/SAC reporting is required - such as for taxpayers with aggregate turnover above ₹5 crore in the preceding financial year - use the specific sub-code that matches your primary work. This is what construction accounting tools and larger contractors typically do to stay audit-ready.

When to Use SAC 9954

Use SAC 9954 when your contract involves:

• Construction of a new residential, commercial, or industrial building
• Civil engineering works (roads, pipelines, water and sewage systems, electrical or communication infrastructure)
• Repair, renovation, alteration, or maintenance of an existing building or civil structure
• Installation or fitting-out work that is part of a larger construction project and involves material transfer

If your contract does not involve immovable property, or does not involve any transfer of material, it likely falls outside the works contract definition - check the comparison below.

Whether you call it a works contract HSN or SAC code, the classification and rate rules described here apply the same way - the terminology varies, but the compliance requirement doesn't.

Works Contract vs Labour Contract vs Pure Supply

Example Calculation

Scenario (illustrative): A contractor is hired to renovate an office building, supplying both materials (tiles, cement, fittings) and labour. Total contract value: ₹10,00,000.

Classification: This is a works contract under Section 2(119) - it involves immovable property (the office building) and transfer of property in goods (materials).

SAC: 9954 (Construction Services - repair/renovation category)

GST rate: 18% (standard rate, assuming no special exemption applies)

GST payable: ₹10,00,000 x 18% = ₹1,80,000

Note: The recipient may be eligible to claim input tax credit on this amount, subject to Section 17(5)(c) restrictions - ITC is generally blocked when the works contract is for construction of an immovable property for the recipient's own use (other than plant and machinery).

Illustrative cost of getting it wrong: If this same ₹10,00,000 invoice had been raised under a goods HSN code instead of SAC 9954, it could trigger a mismatch during GSTR-1 reconciliation - potentially delaying any GST refund claim tied to this transaction and inviting a scrutiny notice.

Common Mistakes

• Using an HSN code instead of SAC 9954 on invoices - since works contract is legally a service, not goods.
• Assuming 18% applies universally without checking if the project qualifies for a concessional category (affordable housing, pure labour exemption).
• Treating a pure supply of goods (e.g., just delivering construction material with no installation) as a works contract - this misclassification can trigger notices during reconciliation.
• Claiming ITC on works contract services for own-use construction, which is typically blocked under Section 17(5)(c) unless the recipient is themselves in the business of further supplying works contract services.
• Incorrect SAC reporting in invoices, e-invoices, and the GSTR-1 HSN/SAC summary, which can create reconciliation issues and trigger queries during scrutiny or refund processing.

Key Takeaways

• Works contract is generally treated as a supply of service under GST, not a supply of goods.
• The commonly used classification for construction-related works contract is SAC 9954.
• Many users search for it as "works contract HSN code," but technically services use SAC, not HSN.
• The standard GST rate is commonly 18% for most works contracts, but always confirm against the latest CBIC notification for your specific project category.
• ITC may be restricted under Section 17(5)(c) for own-use immovable property construction.

Frequently Asked Questions

Is there an HSN code for works contract, or is it always SAC? (Also searched as: "work contract hsn code", "hsn code for works contract")

Works contract is legally treated as a supply of service under Schedule II of the CGST Act, so it always takes a Service Accounting Code (SAC) - most commonly SAC 9954 for construction-related contracts - not a goods HSN code.

What is the GST rate for works contract in 2026? (Also searched as: "works contract hsn code and gst rate")

Most standard works contract services under SAC 9954 are taxed at 18% GST. However, the final rate depends on the nature of work, project type, recipient, and latest applicable CBIC notification. Some pure-labour or specifically notified categories may have separate treatment.

Can I use SAC 9954 in a GST invoice for works contract?

Yes. If the contract involves both material and labour for construction, repair, renovation, installation, or similar work related to immovable property, SAC 9954 is generally used. If you are supplying only goods, use the relevant goods HSN code instead.

Can I claim input tax credit (ITC) on works contract services?

Generally, ITC on works contract services is blocked under Section 17(5)(c) of the CGST Act when the service is used for constructing an immovable property for your own use. An exception applies if you are yourself in the business of supplying works contract services further.

Is a pure labour contract the same as a works contract? (Also searched as: "contract work hsn code")

No. A works contract requires both material transfer and labour under Section 2(119) of the CGST Act. A pure labour contract with no material supplied by the contractor is treated differently, and may be exempt in specific residential or government cases.

Why does correct SAC classification matter for GST refund claims?

Incorrect SAC reporting in invoices, e-invoices, and the GSTR-1 HSN/SAC summary can create reconciliation issues and may trigger queries during scrutiny or refund processing.

CTA

One wrong SAC code can delay your GST refund or trigger a scrutiny notice months later. GetMyCA has helped 50,000+ businesses across India with GST registration, filing, and refund claims since 2015. Our GST team can review your works contract, confirm the correct SAC code, and handle your filing end-to-end - before a notice shows up.

GST Registration Services in India: https://www.getmyca.com/gst-registration

WhatsApp an Expert: +91 92174 87001

Related Reading (Internal Links)

• GST Registration Services in India
• GST Refund Consultant in India
• GST Refund Process in India: Step-by-Step Guide
• CBIC GST Portal (Official)

Official Sources Referenced

• CGST Act, 2017 - Section 2(119)
• CBIC Notification No. 11/2017-Central Tax (Rate)
• CBIC Annexure - Scheme of Classification of Services

About the Reviewer

This article is reviewed by GetMyCA's in-house GST Advisory Team, comprising practicing Chartered Accountants who handle GST registration, filing, and refund cases for businesses across India. All legal references are checked against CBIC notifications and the CGST Act, 2017 at the time of publishing.

About the Author

Paras Nagpal
Business Consultant, GetMyCA
Email: paras@getmyca.com | Phone: +91 92174 87001

Disclaimer

This article is for general informational purposes and does not constitute legal or tax advice. GST rates and classifications are subject to change via government notification. Always verify the applicable rate and classification for your specific contract with a qualified GST practitioner before filing.

About GetMyCA

GetMyCA Consultants Private Limited is a trusted business consultant based in New Delhi, serving clients across India since 2015. GetMyCA is helping entrepreneurs with hasslefree GST refund claims since 2018. Our team of qualified Chartered Accountants has successfully recovered stuck credits for businesses across pharma, footwear, corrugated box manufacturing, and ecommerce sectors.

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