Looking for expert help with Income tax and GST for cement, steel and building material dealers India? 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
- Cement moved from 28% to 18% GST on 22 September 2025. TMT bars, angles, sheets, wire and steel pipes are also 18% (Notification 9/2025-Central Tax (Rate), Schedule II).
- Sand, crushed stone aggregates, gypsum and lime are 5% (Schedule I).
- TCS on sale of goods under Section 206C(1H) stopped from 1 April 2025. If your turnover crossed Rs 10 crore last year, you deduct 0.1% TDS under Section 194Q on purchases above Rs 50 lakh from one seller.
- Contractors doing works contracts can usually claim ITC on your bills; businesses and families building for themselves can't (Section 17(5)(d), CGST Act).
- Thin steel margins make Section 44AD's 6% deemed profit costly. Leaving the scheme after using it locks you out for five years.
What is the GST rate on cement and steel in India? From 22 September 2025, cement (HSN 2523) is 18% GST, down from 28%. TMT bars and rods (7213 to 7215), angles and channels (7216), steel sheets (7208 to 7212) and steel pipes (7306) are also 18%. Natural sand (2505) and stone aggregates (2517) are 5% (Notification 9/2025-Central Tax (Rate)).
A building material yard runs on big tickets and thin margins. One truck of TMT bars can be worth several lakh rupees, and the profit on it may be 2% or 3%. That changes which tax rules matter to you. The GST rate is simple: almost everything is 18% or 5%. The work is in contractor billing, Section 194Q TDS on large purchases, e-way bills on every truck, and choosing between presumptive tax and books. This guide covers each for AY 2026-27. If you also sell paint, pipes and fittings, see our hardware and paint shop guide.
Which GST rate applies to each item in your yard?
The September 2025 changes cut cement to 18% and left steel at 18%. Loose materials like sand and aggregates sit in the 5% slab.
Comparison
GST Rates for Cement, Steel and Building Materials (from 22 September 2025)
| Item | HSN | GST rate |
|---|---|---|
| Cement: OPC, PPC, slag and other hydraulic cements, clinker | 2523 | 18% |
| TMT bars and other bars and rods of iron or non-alloy steel | 7213 to 7215 | 18% |
| Angles, channels, beams and sections of iron or non-alloy steel | 7216 | 18% |
| Binding wire and other wire of iron or non-alloy steel | 7217 | 18% |
| Flat-rolled steel: sheets, plates, coils (including GI and colour-coated) | 7208 to 7212 | 18% |
| Steel tubes and pipes, including square and rectangular hollow sections | 7306 | 18% |
| Steel structures, doors, window frames, shutters | 7308 | 18% |
| Wire mesh, fencing and chain link of iron or steel wire | 7314 | 18% |
| Nails, screws, bolts and nuts of iron or steel | 7317, 7318 | 18% |
| Concrete blocks, paver blocks, RCC pipes and other articles of cement or concrete | 6810 | 18% |
| Asbestos-cement and fibre-cement roofing sheets | 6811 | 18% |
| Gypsum boards and plaster boards | 6809 | 18% |
| Natural sand | 2505 | 5% |
| Pebbles, gravel, crushed stone, stone chips and aggregates | 2517 | 5% |
| Gypsum and plaster of calcined gypsum | 2520 | 5% |
| Quicklime, slaked lime and hydraulic lime | 2522 | 5% |
Source: Notification 9/2025-Central Tax (Rate): Schedule II S. No. 9, 225, 226, 227, 267, 268, 269, 270, 284, 286, 292, 295, 296; Schedule I S. No. 166, 182, 185, 187
Two lines trip dealers up. Gypsum powder (2520) is 5%, but gypsum board (6809) is 18%, so don't bill both under one code. And bricks aren't in this table on purpose: clay bricks and fly ash bricks have their own entries, so check the HSN on your purchase bill before you set a rate in your billing software.
Who can claim input tax credit on your bills?
Most of your bigger customers are builders and contractors, so this matters more than the rate.
Section 17(5)(d) of the CGST Act blocks input tax credit (ITC) on goods a business uses to build immovable property on its own account. Cement and steel used in a building become part of it. So the answer depends on who's building for whom:
Comparison
Who Can Claim ITC on Cement and Steel?
| Buyer | Claims ITC on your 18%? | Why |
|---|---|---|
| Family building its own house | No | Not registered, or buying for personal use |
| Business building its own office, factory shed or shop | No | Section 17(5)(d): construction on own account |
| Contractor building for a client under a works contract | Usually yes | Goods used for a further supply of works contract service |
| Another dealer buying stock for resale | Yes | Normal trading ITC |
Source: Sections 2(119), 16 and 17(5)(c), (d), CGST Act 2017
A contractor needs your tax invoice to claim that credit, and a composition dealer can only issue a bill of supply. That's why most cement and steel dealers with contractor customers stay on the regular scheme. If you sell mostly bags of cement to households, composition at 1% of turnover (Rule 7, CGST Rules) may still suit you; our composition scheme guide covers the conditions, including the bar on inter-state sales.
Does Section 194Q TDS apply to your purchases or sales?
TCS on sale of goods under Section 206C(1H) does not apply from 1 April 2025 (Finance Act 2025). If your billing software still adds 0.1% TCS on large customers, switch it off. What remains is Section 194Q, which puts the job on the buyer.
When you're the buyer. If your total turnover was above Rs 10 crore in the previous financial year, you must deduct TDS of 0.1% on purchases from a resident seller once your purchases from that seller cross Rs 50 lakh in the year. You deduct at the time of credit or payment, whichever is earlier, on the amount above Rs 50 lakh.
Say your FY 2024-25 turnover was Rs 12 crore, and in FY 2025-26 you buy Rs 9 crore of TMT bars from one steel mill. TDS = 0.1% of (Rs 9,00,00,000 minus Rs 50,00,000) = 0.1% of Rs 8,50,00,000 = Rs 85,000. You deposit it, file the quarterly TDS return, and the mill claims credit for it.
When you're the seller. If a builder with turnover above Rs 10 crore buys more than Rs 50 lakh from you in a year, they deduct 0.1% from your payment. That's tax already paid on your behalf. Match it in Form 26AS before you file, and claim it in your ITR.
From 1 April 2026 (FY 2026-27), TDS sits under Section 393 of the Income-tax Act 2025. Our Section 194Q guide covers the new-Act position, and our TDS filing service handles the deposits and returns.
When do you need registration, e-way bills and e-invoices?
If you only sell goods, GST registration is required once aggregate turnover crosses Rs 40 lakh in most states. Telangana and several other states kept the Rs 20 lakh limit (Notification 10/2019-Central Tax). Most cement and steel dealers cross that in a few months. See our GST registration service.
Every truck that leaves your yard carrying goods worth more than Rs 50,000 needs an e-way bill if it's an inter-state movement (Rule 138, CGST Rules). For movement within the state, each state sets its own limit; check yours in our state-wise e-way bill limits guide.
Once your aggregate turnover crosses Rs 5 crore in any financial year from 2017-18 onwards, you must issue e-invoices for sales to registered buyers. A steel dealer can reach that in the second or third year. Our e-invoicing guide covers the setup.
How is your income taxed for AY 2026-27?
Step-by-Step Guide
Choosing How to Report Building Material Income
Check Section 44AD eligibility
Resident individual, HUF or partnership firm (not LLP). Turnover up to Rs 2 crore, or up to Rs 3 crore if cash receipts are within 5% of total receipts.
Compare 6% with your real margin
Deemed profit is 6% of digital receipts and 8% of cash. Steel and cement margins are often lower than that.
Know the five-year lock
If you used Section 44AD and then declare a lower profit, Section 44AD(4) bars the scheme for five years. Books and a tax audit follow if income is above the exemption limit (Section 44AD(5), 44AB(e)).
Check the audit limit if you keep books
Section 44AB(a) audit applies above Rs 1 crore turnover, or Rs 10 crore if cash receipts and cash payments are each within 5%.
File the right form
ITR-4 for Section 44AD if total income is within Rs 50 lakh and other conditions are met; ITR-3 if you keep full books.
Source: Sections 44AD, 44AB and 87A, Income-tax Act 1961; Finance Act 2025
Example 1 (cement retailer on Section 44AD, new regime): Turnover Rs 2.6 crore, of which Rs 2.5 crore by UPI and bank, and Rs 10 lakh in cash. Cash is about 3.8% of receipts, so the Rs 3 crore limit applies.
- Deemed profit: 6% of Rs 2,50,00,000 (Rs 15,00,000) plus 8% of Rs 10,00,000 (Rs 80,000), so Rs 15,80,000.
- Tax: Rs 20,000 on Rs 4-8 lakh, Rs 40,000 on Rs 8-12 lakh, and 15% of Rs 3,80,000 (Rs 57,000). Total Rs 1,17,000.
- No Section 87A rebate, as income is above Rs 12 lakh. Add 4% cess of Rs 4,680. Tax payable: Rs 1,21,680.
If this retailer's books show a real margin of 4%, the scheme taxes about Rs 5 lakh of profit that doesn't exist. Declaring actual profit may cost less tax, but it means books, an audit, and five years outside Section 44AD. Run the numbers for at least two years before you switch.
Example 2 (steel dealer with books, new regime): Turnover Rs 8 crore, above the Section 44AD limit, so the proprietor keeps books. Cash receipts and cash payments are each under 5%, so the audit limit is Rs 10 crore and no tax audit is needed. Net profit from the books is Rs 20 lakh.
- Tax: Rs 20,000 on Rs 4-8 lakh, Rs 40,000 on Rs 8-12 lakh, Rs 60,000 on Rs 12-16 lakh, and Rs 80,000 on Rs 16-20 lakh. Total Rs 2,00,000.
- Add 4% cess of Rs 8,000. Tax payable: Rs 2,08,000.
If the same dealer's cash receipts were 8% of the total, the Rs 1 crore audit limit would apply instead, and the accounts would need a tax audit.
Common mistakes building material dealers make
- Still collecting TCS under Section 206C(1H). It doesn't apply from 1 April 2025. Check whether your buyer deducts Section 194Q TDS instead.
- Missing Section 194Q on your own purchases. Once your previous year's turnover crosses Rs 10 crore, every mill or cement company you buy more than Rs 50 lakh from needs 0.1% deducted.
- Billing gypsum board at the gypsum powder rate. Powder (2520) is 5%; boards (6809) are 18%.
- Paying truck owners in cash. If you keep books, a cash payment above Rs 35,000 in a day to one person for hiring a goods carriage, or above Rs 10,000 for other expenses, is disallowed under Section 40A(3). See our Section 40A(3) guide.
- Taking Rs 2 lakh or more in cash for one order. Receiving Rs 2 lakh or more in cash from one person for one transaction breaks Section 269ST, and a single truckload of steel crosses that easily. See our cash transaction limits guide.
How Tax Garden helps cement and steel dealers
We file your GSTR-1 and GSTR-3B, match contractor and builder sales to the right GSTINs, and track Section 194Q TDS on both sides; see our GST return filing service. We also keep your books, compare Section 44AD with your actual margin, and prepare your ITR; see our ITR filing service and pricing.
