# Construction Services — Exemptions

## Pure Labour Contracts for Housing Schemes

Services provided by way of pure labour contracts for construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works pertaining to the beneficiary-led individual house construction or enhancement under:

PMAY (Pradhan Mantri Awas Yojana) — Urban
Housing for All (Urban) Mission

are exempt.

## Conditions for Exemption — Single Residential Unit

For pure labour contracts (other than the above scheme) — services of construction/erection/etc. of a single residential unit otherwise than as part of a residential complex are exempt.

Key requirements:

Must be a single residential unit (not part of a residential complex)
Must be 'original work' (i.e. all new construction, additions and alterations to abandoned/damaged structures required to make them workable)
Pure labour contract (no transfer of materials)

## Electricity Distribution to Farmers

Services of supply of electricity by the distribution licensee to the consumer for use by the farmer for agriculture purposes — Exempt.

## Long-term Lease (TDR/FSI) — Promoter

Long-term lease (≥ 30 years) of land by any person against consideration in the form of upfront premium for construction of residential apartments by a promoter:

Situation	GST Treatment
TDR/FSI/long-term lease relating to SOLD flat (booked before completion)	Exempt
TDR/FSI/long-term lease relating to UNSOLD flat (lying unsold on completion date)	Taxable — promoter pays GST under RCM

Worked example

### Example 1

Example 1: A contractor provides pure labour services for construction of a house under PMAY-Urban for a beneficiary. Charges ₹3 lakhs. Answer: Exempt — pure labour contract under PMAY is specifically exempt.

### Example 2

Example 2: A contractor undertakes a pure labour contract to build Mr. X's single bungalow (not part of a complex). Answer: Exempt — pure labour contract for single residential unit not forming part of complex.

### Example 3

Example 3: A builder constructs an apartment complex of 50 flats. He sells 40 before completion and 10 remain unsold on the completion certificate date. Landowner has given land on long-term lease. Answer: TDR relating to 40 sold flats — exempt. TDR relating to 10 unsold flats — taxable in hands of promoter under RCM.

### Example 4

Example 4: A power distribution company supplies electricity to a farmer's agricultural pumpset. Answer: Exempt — electricity supplied to farmer for agricultural purposes.

⚠️ Common exam mistakes

Treating works contracts (with materials) under PMAY as exempt — only PURE LABOUR contracts are exempt.
Treating any single residential unit construction as exempt — it must be 'original work' and not part of a residential complex.
Forgetting that TDR/FSI/long-term lease for unsold flats becomes taxable in the promoter's hands on the date of completion certificate.
Treating supply of electricity to industrial consumers as exempt — only supply to farmers for agricultural use is exempt.

Bare-Act text Entry 10 · Notification No. 12/2017-CT(R) dated 28.06.2017 · click to expand

Services provided by way of pure labour contracts of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works pertaining to the beneficiary-led individual house construction or enhancement under the Housing for All (Urban) Mission or Pradhan Mantri Awas Yojana (Urban).

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Construction Services Exemptions (PMAY, Housing for All)

Worked example

⚠️ Common exam mistakes