Looking for expert help with Borewell drilling GST rate and SAC code? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Key Takeaways
- Borewell drilling is a construction service under SAC 995434 at 18% GST (Notification 11/2017-CT(R), S. No. 3, item (xii)).
- Drilling plus casing pipes plus a pump is a works contract, so the whole bill is 18%, even if one part (a hand pump) would be 5% on its own.
- There's no farmer exemption for borewells. The only nil route is a pure drilling service, with no goods, for a government or local body under Notification 12/2017-CT(R), S. No. 3.
- Register above Rs 20 lakh. The 6% composition option (up to Rs 50 lakh) suits rigs that work mostly for farmers, but not across State borders.
- For income tax, 44AD (Section 58 from 1 April 2026) covers turnover up to Rs 2 crore or Rs 3 crore. Don't take Rs 2 lakh or more in cash for one job.
What is the GST rate and SAC code for borewell drilling? Borewell drilling falls under SAC 995434 (water well drilling services) and is taxed at 18%, which is 9% CGST plus 9% SGST, under item (xii) of serial number 3 of Notification 11/2017-Central Tax (Rate). A job that includes casing pipes or a pump is a works contract, also 18% on the full value.
A rig owner's week might look like this. On Monday you drill 250 feet for a farmer, lower PVC casing and fit a submersible pump. On Wednesday a builder wants a bore for a new apartment block. On Friday the gram panchayat calls about a drinking water bore near the school. Three customers, but the GST answer is nearly the same each time, and the exceptions are narrower than many drillers assume. This post covers GST on drilling jobs and on what you buy, registration and the 6% composition route, and income tax for FY 2025-26 (AY 2026-27) under the Income-tax Act 1961, with the Income-tax Act 2025 sections that apply from 1 April 2026. It's for borewell rig owners, drilling contractors and the CAs who file for them.
What GST do you charge on a borewell job?
18%, on almost every job. CBIC's Explanatory Notes to the services classification put "water well drilling and septic system installation services" under SAC 995434, inside heading 9954 (construction services). The note says this code covers "drilling or digging water wells, installation services of water well pumps and well piping systems". So drilling, casing and pump fitting all sit in the same code.
Heading 9954 is serial number 3 of Notification 11/2017-Central Tax (Rate). Borewell work doesn't match any of the concessional items there (affordable housing, earthwork for government and so on), so it falls in item (xii), "construction services other than" the listed ones, at 9% CGST, substituted by Notification 1/2018-Central Tax (Rate). The old 12% entries for government works on pipelines and water supply plants were omitted by Notification 3/2022-Central Tax (Rate) from 18 July 2022, so a drilling contract for a government water scheme is 18% as well.
When you supply goods with the drilling (casing pipes, a pump, a cable, a panel) and install them in the ground, you're improving immovable property with a transfer of goods. That's a works contract under Section 2(119) of the CGST Act, and Schedule II, paragraph 6(a) makes it a supply of services. You don't split the bill into a 5% hand pump and an 18% service. The whole contract value is 18%.
Example: you drill 300 feet for a farmer at Rs 100 a foot (Rs 30,000), lower 60 feet of PVC casing at Rs 400 a foot (Rs 24,000) and supply and fit a submersible pump set for Rs 36,000. The contract value is Rs 90,000. GST at 18% is Rs 16,200 (Rs 8,100 CGST plus Rs 8,100 SGST), so the bill is Rs 1,06,200.
What about farmers? Serial number 54 of Notification 12/2017-Central Tax (Rate) exempts support services for agriculture, such as cultivation, harvesting and renting of agro machinery, but those entries sit under heading 9986. Borewell drilling is 9954. We found no entry that exempts a borewell on farmland, so don't bill farmers at nil.
What about a panchayat? Serial number 3 of Notification 12/2017 exempts pure services (excluding works contracts and other composite supplies involving goods) supplied to the Central or State Government, a Union territory or a local authority for a function entrusted to a panchayat or municipality. A drilling-only job for a gram panchayat's drinking water bore can fit. Once you supply a hand pump or casing as part of the order, it's a works contract and the exemption doesn't apply.
GST rates on what you buy (and sometimes sell)
Comparison
GST on Borewell Work and Inputs (from 22 September 2025)
| Item (SAC or HSN) | GST | Notification entry |
|---|---|---|
| Borewell drilling, with or without casing and pump (SAC 995434) | 18% | 11/2017-CT(R), S. No. 3, item (xii) |
| Drilling-only service to a government or local body for a panchayat or municipal function | Nil | 12/2017-CT(R), S. No. 3 |
| Submersible, deep tube-well and other power-driven water pumps (8413) | 18% | 9/2025-CT(R), Sch II, S. No. 400 |
| Parts of power-driven water pumps (84 or 85) | 18% | 9/2025-CT(R), Sch II, S. No. 387 |
| Hand pumps and parts (8413, 8413 91) | 5% | 9/2025-CT(R), Sch I, S. No. 425 |
| PVC and other plastic pipes and fittings (3917) | 18% | 9/2025-CT(R), Sch II, S. No. 118 |
| Steel casing pipes (7304, 7306) | 18% | 9/2025-CT(R), Sch II, S. No. 282, 284 |
| Drill bits and other interchangeable tools (8207) | 18% | 9/2025-CT(R), Sch II, S. No. 367 |
| Boring machinery for earth (8430) | 18% | 9/2025-CT(R), Sch II, S. No. 419 |
| Truck-mounted special purpose vehicles (8705) | 18% | 9/2025-CT(R), Sch II, S. No. 541 |
| Insulated cable (8544) | 18% | 9/2025-CT(R), Sch II, S. No. 516 |
Source: CBIC Notifications 11/2017, 1/2018, 3/2022 and 12/2017-CT(R); 9/2025-CT(R) (17 September 2025, in force 22 September 2025); CBIC Explanatory Notes to the Scheme of Classification of Services
Since your output is 18% and your pipes, pumps, bits and rig parts are 18% too, a regular-scheme driller can set most purchase GST against sales GST. The big gap is diesel. GST on high speed diesel only starts from a date the Government notifies (Section 9(2) of the CGST Act), and no date has been notified, so the VAT on your rig's fuel never becomes input tax credit.
One case where you sell goods, not a service: if a customer buys a pump from you over the counter and fits it themselves, that's a sale under heading 8413 at 18% (5% for a hand pump). Keep it on a separate invoice from your drilling jobs.
Business customers sometimes ask whether they can claim credit on your bill. Section 17(5)(c) of the CGST Act blocks credit on works contract services for constructing immovable property other than plant and machinery. How a borewell is treated under that rule depends on the facts, so point them to their own CA rather than promising credit.
Registration, composition and jobs across a State border
When to register. Section 22(1) of the CGST Act sets the limit at Rs 20 lakh of aggregate turnover in a financial year (Rs 10 lakh in special category States). The higher Rs 40 lakh limit is only for suppliers of goods alone, and drilling is a service. A rig drilling 15 to 20 bores a month crosses Rs 20 lakh quickly. Our registration limit guide has the State-wise picture, and our GST registration service files the application.
Composition at 6%. Section 10(2A) lets a service supplier pay 3% CGST plus 3% SGST under Notification 2/2019-Central Tax (Rate) if aggregate turnover in the preceding financial year was up to Rs 50 lakh. The conditions:
- You issue a bill of supply, collect no GST from the customer and claim no input tax credit.
- No inter-State outward supplies.
- The bill must carry the line "taxable person paying tax in terms of notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies".
Run the numbers on your own mix. Say last year's turnover was Rs 40 lakh, all from farmers, and you bought Rs 20 lakh of pipes and pumps. Composition costs 6% of Rs 40 lakh, which is Rs 2,40,000. On the regular scheme, output tax is Rs 7,20,000 and credit on Rs 20 lakh of purchases is Rs 3,60,000, so you pay Rs 3,60,000 in cash. Farmers can't use your GST as credit anyway, so for a farm-heavy rig composition often costs less. A rig that works for builders and factories, who want a tax invoice, may lose those customers on composition. Our composition scheme guide compares both routes.
Drilling in the next State. Under Section 12(3)(a) of the IGST Act, the place of supply for services directly in relation to immovable property is where the property is. If your rig is registered in Telangana and you drill a bore in a village in Andhra Pradesh, that's an inter-State supply at 18% IGST. A composition taxpayer can't make inter-State supplies at all, so check where your next jobs are before you opt in. Our place of supply guide explains the rule.
Step-by-Step Guide
Billing a Borewell Job Under GST
Write a job card for each bore
Record the customer, the site address and State, feet drilled, casing length and any pump or panel supplied. The site's State decides CGST plus SGST or IGST.
Decide service, works contract or sale
Drilling alone is a service; drilling with pipes or a pump fitted is a works contract; a pump sold over the counter is goods. The first two are SAC 995434 at 18%.
Check for the panchayat exemption
Nil applies only to a drilling-only job for a government or local body, for a panchayat or municipal function. Supplying any goods brings it back to 18%.
Raise the invoice
Regular scheme: tax invoice at 18% on the full contract value. Composition: bill of supply with the 2/2019 line and no GST charged.
Match purchases and file returns
Claim credit on pipes, pumps and bits only after they appear in GSTR-2B, then file GSTR-1 and GSTR-3B. On composition, file the composition returns instead.
Source: Notifications 11/2017, 12/2017 and 2/2019-CT(R); CGST Act Section 2(119) and Schedule II; IGST Act Section 12(3)
Income tax: 44AD, TDS on your bills and cash from farmers
Section 44AD. For FY 2025-26, a resident individual, HUF or partnership firm (not an LLP) can declare 6% of turnover received by bank transfer, UPI or account payee cheque (by the return due date) and 8% of the rest as profit under Section 44AD of the Income-tax Act 1961. The limit is Rs 2 crore of turnover, or Rs 3 crore if cash receipts are within 5% of turnover. From 1 April 2026 the same scheme is Section 58(2), Table Sl. No. 1, of the Income-tax Act 2025, with the same rates and limits.
Example: a proprietor's rig has turnover of Rs 75,00,000 in FY 2025-26: Rs 45,00,000 by bank and UPI and Rs 30,00,000 in cash from farmers. Cash is 40% of turnover, so the limit is Rs 2 crore, and Rs 75 lakh is within it. Deemed profit is 6% of Rs 45,00,000 (Rs 2,70,000) plus 8% of Rs 30,00,000 (Rs 2,40,000), so Rs 5,10,000. A rig is heavy capital: depreciation on plant and machinery is 15% of written-down value under New Appendix I of the Income-tax Rules 1962, so a Rs 60 lakh rig gives Rs 9 lakh of depreciation in a full year. Add diesel and bit wear and your books may show less profit than 44AD. Check both with your CA, and read our Section 44AD guide on the five-year lock-in before you opt out. If you stay on 44AD, advance tax is a single payment by 15 March (Section 408(2) of the 2025 Act for FY 2026-27).
TDS on your bills. Companies, firms and other designated persons who hire you for drilling deduct TDS under Section 194C of the 1961 Act: 1% if you're an individual or HUF, 2% if you're a firm or company. It applies once a single bill exceeds Rs 30,000 or the year's bills from that customer exceed Rs 1,00,000. On a builder's Rs 90,000 drilling charge (before GST), that's Rs 900 from a proprietor. From 1 April 2026 this is Section 393(1), Table Sl. No. 6(i), of the Income-tax Act 2025, same rates and limits. Farmers paying for their own fields aren't designated persons for this entry, so most of your farm jobs come without TDS. Claim every deduction from Form 26AS. Our Section 194C guide has the details.
Cash from customers. Under Section 269ST of the 1961 Act (Section 186 of the 2025 Act), you can't receive Rs 2,00,000 or more in cash from one person in a day, for a single transaction, or for one event. A 600-foot bore with casing, a 10 HP pump and a panel can easily come to Rs 2,40,000 with GST. Taking all of that in cash, even spread over three visits, breaches the single-transaction limit. The penalty is equal to the amount received (Section 271DA of the 1961 Act; Section 451 of the 2025 Act). Ask for UPI or a bank transfer on larger jobs.
Cash you pay. If you keep books, a payment above Rs 10,000 in cash to one person in a day isn't allowed as a deduction (Section 40A(3) of the 1961 Act; Section 36(4) of the 2025 Act). Paying a pipe dealer Rs 25,000 in cash for one lot means the whole Rs 25,000 is disallowed. Our cash transaction limits guide covers both sides.
Common mistakes borewell contractors make
- Billing farmers at nil. There's no farm exemption for borewells. Agricultural entries cover heading 9986, not drilling.
- Splitting the bill to use the 5% hand pump rate. A supply-and-install job is one works contract at 18%.
- Claiming the panchayat exemption on a supply-and-fit order. It covers pure services only.
- Waiting for Rs 40 lakh to register. Drilling is a service; the limit is Rs 20 lakh.
- Opting for composition and then drilling across the border. An inter-State job breaks the 2/2019 conditions.
- Taking Rs 2 lakh or more in cash for one bore. The penalty equals the cash received.
- Ignoring 194C TDS in Form 26AS. Builders and companies deduct 1% or 2%. If you don't claim it, you pay that tax twice.
How Tax Garden helps borewell contractors
We start with your job cards and site addresses, because those decide the rate, the State and whether a job could fall under the panchayat exemption. We register you, compare 6% composition with the regular scheme on your real customer mix, track credit on pipes and pumps, and file GSTR-1 and GSTR-3B through our GST return filing service. At year end we reconcile 194C TDS with Form 26AS, test 44AD against your books and rig depreciation, and file your ITR through our ITR filing service. Call or WhatsApp us on 9640290977.
Related reading: GST on works contracts and construction services, GST and income tax for JCB and earthmover hire owners, GST and income tax for solar panel installers (many fit solar pumps on bores), and income tax for contractors and sub-contractors.
