GST & Indirect Tax

GST on Works Contract for Interior Fit-outs: FAQ for Founders, CFOs and Individuals

📅 June 2026GSTReviewed by CA Nikhil Gupta · 19 June 2026Law in force as of 19 June 2026✔ cbic-gst.gov.in

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.

✅

Quick answer: civil, electrical and plumbing work that becomes fixed to the building (false ceilings, embedded wiring, partition walls) is a works contract taxed at 18% with input tax credit BLOCKED under Section 17(5)(c). Free-standing, demountable furniture and equipment (modular workstations, IT hardware, CCTV cameras) is ordinary movable goods, taxed at its own HSN rate, with ITC available normally. Classify component-by-component, not the whole project under one label - and remember that invoicing an item separately does not change whether it is actually movable.

Use the Finin2min GST Services Rate Master to apply these points to your figures or facts.

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.

For the connected rule, example or next step, see GST on Solar Projects: Goods vs Works Contract.

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%)

⚠️

Don't Default Every Fit-out to "Works Contract": Treating every goods-plus-services interior project as a works contract is a common but incorrect simplification. Classification turns on whether the item, once installed, becomes attached to the immovable property or remains a separate, removable item of furniture or equipment. Get this assessed component-by-component rather than applying one label to the whole project.

ITC on Interior Fit-out: The Blocked Credit Problem

🚨

ITC Blocked for Immovable Property Construction: Section 17(5)(c) of the CGST Act blocks ITC on works contract services used for construction of immovable property — even if the property is for business use. 'Construction' includes renovation, alteration and fitting out of immovable property. This means the 18% GST paid on office fit-out to a contractor is NOT available as ITC. It is a direct cost.

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.

For the connected rule, example or next step, see Works Contract GST: Construction, Repairs and Composite Supply Questions.

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.

🚨

Invoice Splitting Does Not Create ITC Eligibility: Issuing a separate invoice for an item that is, in substance, fixed to the building (built-in cabinetry, embedded partitions, fitted electrical work) does not convert it into a movable goods supply for ITC purposes. Tax authorities and courts look at the underlying nature of the item — whether it can be removed without substantial damage and reused elsewhere — not the invoice format. Genuine movable furniture purchased and invoiced separately is eligible on its own merits; the separate invoice doesn't cause that eligibility, the movability does.

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

Total fit-out budget: ₹80L

Civil works (ceiling, walls, flooring — fixed to building)

₹35L + 18% GST = ₹6.3L — ITC BLOCKED (genuine works contract, Section 17(5)(c))

Electrical works (embedded wiring)

₹12L + 18% GST = ₹2.16L — ITC BLOCKED (embedded in building)

Modular furniture (free-standing, demountable)

₹25L + 12% GST = ₹3L — ITC AVAILABLE (genuinely movable goods)

IT equipment (computers, servers)

₹8L + 18% GST = ₹1.44L — ITC AVAILABLE (movable equipment)

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.

FAQ

Is GST on painting and renovation work ITC-eligible? +

No — if painting is part of a works contract for immovable property renovation, ITC is blocked under Section 17(5)(c). If painting is a pure service contract without supply of paint (labour-only contract for immovable property repair/renovation), ITC is still blocked. ITC on building/immovable property works contracts is broadly blocked, with limited exceptions for plant and machinery.

Does a restaurant's kitchen fit-out attract 18% GST? +

Yes — kitchen fit-out including counters, exhaust systems and plumbing installed in a restaurant is a works contract at 18%. ITC is blocked on the fit-out GST (immovable property). However, kitchen equipment purchased separately as movable goods (gas ranges, refrigerators, ovens) may allow ITC, though restaurants are also subject to the food service ITC block under Section 17(5). A restaurant making only 5% GST supplies has limited ITC claim eligibility.

Can I claim ITC on CCTV and security system installation? +

It depends on whether each component is movable equipment or becomes part of the building. CCTV cameras and the DVR/NVR unit are generally movable goods (they can be unscrewed and reused elsewhere) — ITC is available on these under the normal Section 16 conditions. Embedded wiring run through walls and conduits is more likely to be treated as part of the immovable property and may fall within the Section 17(5)(c) block. Document each component's nature accurately; a separate invoice for the camera hardware reflects what it actually is rather than creating eligibility on its own.

Additional practical controls

The following points consolidate distinct practical guidance from overlapping Finin2min coverage into this definitive page.

Interior fit-outs are a high-risk GST area because the same project may include furniture, movable assets, civil work, electrical installation, HVAC, flooring and renovation. The tax result changes sharply when it becomes a works contract linked to immovable property.
Section 2(119) defines works contract with reference to building, construction, fabrication, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of immovable property where transfer of property in goods is involved. For interior fit-outs, the key practical question is whether the work is attached to or results in immovable property.
Section 17(5) blocks ITC for works contract services for construction of immovable property, subject to specific exceptions and wording. It also covers goods or services used for construction of immovable property on own account when capitalised. Finance teams should not decide credit merely from vendor charging GST.
This article uses official GST law, rules, GST Council, CBIC/GST portal and government-source material only. Notifications, circulars, rule text and portal workflows can change after this article’s last-reviewed date — verify against the current official source before relying on it.

Source and review trail

Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.

Primary category: GST & Indirect Tax
Official starting point: www.gst.gov.in

Page source links

Primary sources & related provisions

Statutory provisions referenced in this guide: