GST on Works Contract for Interior Fit-outs: FAQ for Founders, CFOs and Individuals
Interior fit-out projects — false ceilings, flooring, modular workstations, electrical work, plumbing — mix multiple GST classifications, and only some of them are 'works contracts'. Under Section 2(119) of the CGST Act, a works contract specifically means a contract for building, construction, fabrication, fitting out, improvement, modification, repair, maintenance or similar activity carried out on goods+services in relation to immovable property. Work on genuinely movable items — like free-standing modular furniture that can be dismantled and relocated — is not a works contract; it is ordinarily a composite supply of goods. This guide covers the most common situations faced by offices, restaurants and retail stores.
What Is a Works Contract Under GST?
Section 2(119) defines a works contract narrowly: it must involve transfer of property in goods in the execution of a contract relating to immovable property. Under Schedule II of the CGST Act, a genuine works contract is treated as a supply of service. The immovability test is what separates a works contract from an ordinary composite or mixed supply of goods — the activity has to attach to land or a building in a way that isn't easily reversible.
| Activity | Classification | GST Rate |
|---|---|---|
| Civil construction — false ceiling, partition walls fixed to the building | Works contract (immovable property) | 18% |
| Electrical wiring + fixtures embedded in walls (new office) | Works contract (immovable property) | 18% |
| Supply + installation of free-standing/demountable modular furniture | Composite supply of goods (movable, not works contract) | HSN rate of the furniture, typically 12%–18% |
| Pure labour painting (no material supply) on the building | Service — but not a works contract unless goods also transferred | 18% |
| Purchase of furniture with no installation service | Goods supply | HSN rate (12%–18%) |
ITC on Interior Fit-out: The Blocked Credit Problem
Exception: ITC IS available if the works contract is for plant and machinery (movable). If modular workstations are movable (can be dismantled and relocated), ITC may be claimable. This is a factual determination — get it documented in the contract.
Movable vs Immovable: What Actually Determines ITC
ITC eligibility on interior fit-out follows the substance of what was supplied, not how the invoice is structured. Genuinely movable items — furniture that can be dismantled and relocated, equipment that isn't embedded in the structure — are not "construction of immovable property" in the first place, so Section 17(5)(c)/(d) simply doesn't apply to them; ITC is available under the normal Section 16 conditions. Civil, electrical and plumbing work that becomes part of the building remains blocked regardless of how it is invoiced.
What does help: documenting the technical specification of each item (demountable vs fixed), keeping genuinely separate purchase orders for free-standing furniture versus civil/electrical works, and ensuring the contractor's scope of work accurately describes what is fixed versus movable. This creates an accurate record — it does not "convert" an immovable item into a movable one.
Case Study: IT Company Setting Up a 200-Seat Office
Case Study: Nexus Tech, Gurugram — New Office Setup
Nexus Tech's furniture and IT equipment qualify for ITC because they are genuinely movable items, not because they were purchased on a separate invoice from the civil works. Had the company tried to label fixed partitions or embedded electrical work as "furniture" on a separate invoice to claim ITC, that ITC would remain disallowed on audit — the test is what the item actually is, not how it's billed. The civil and electrical GST (₹8.46L) is a blocked cost regardless of invoicing structure because those items are fixed to the building.