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Key Highlights
- Since April 1, 2022, the GST rate on bricks has increased from 5% to 12% for businesses not opting for the composition scheme. Those opting for the special composition scheme need to pay 6% GST but cannot claim an input tax credit (ITC).
- The mandatory GST registration threshold for brick manufacturers has been reduced from ₹40 lakh to ₹20 lakh. This means more small-scale brick manufacturers must now register for GST.
- To promote eco-friendly materials, GST on autoclaved aerated concrete (AAC) blocks containing more than 50% fly ash has been reduced from 18% to 12%, encouraging the use of sustainable construction alternatives.
You are a builder, a contractor, or even a small business owner dealing in bricks. You are ready to take on your next big project, but then comes the tricky part – taxation. The goods and services tax (GST) has changed the way businesses operate in India, and if you are in the brick industry, it is crucial to understand how GST applies to different types of bricks, including fly ash bricks and red bricks.
GST Increase on Bricks: Effects on Small-Scale Manufacturers
The Indian government has revised the goods and services tax (GST) rates for the brick industry, effective April 1, 2022. Previously, brick manufacturers were charged a GST rate of 5%, with the option to claim input tax credit (ITC) . However, the new rates have increased to 12% for businesses not opting for the composition scheme, while those opting for the scheme will pay a reduced rate of 6% without ITC.The composition scheme simplifies brick kilns' tax compliance by paying a lower GST rate without claiming ITC. This scheme is particularly beneficial for small and medium-sized enterprises (SMEs) in the brick industry, as it reduces their tax burden and administrative workload. However, businesses that choose not to opt for the composition scheme will face a higher GST of 12%, which may impact their profitability and pricing strategies.For example, consider a brick manufacturer with an annual turnover of ₹25 lakh. Under the previous GST regime, the manufacturer would have paid 5% GST with the ability to claim ITC. With the new rates, if the manufacturer opts for the composition scheme, they will pay 6% GST without ITC. If they choose not to opt for the scheme, they will pay 12% GST and can enjoy ITC. This change in GST rates aims to streamline tax compliance and encourage the adoption of sustainable building materials, such as fly ash bricks, which are subject to a lower GST rate of 5%
Other Changes for Brick Manufacturers
Apart from changes in thebricks GST rate structure, other modifications to the previous rules include:
Registration Threshold
The threshold for mandatory GST registration was reduced from ₹40 lakh to ₹20 lakh. That means any brick manufacturer with an annual turnover exceeding ₹20 lakh must now register for GST.
Composition Scheme
Previously, brick manufacturers could opt for the composition scheme if their aggregate turnover did not exceed ₹1.5 crore. Under this scheme, they paid a lower tax rate of 1%. However, the new notification disallows brick manufacturers from opting for the composition scheme. Instead, they are brought under a special composition scheme that attracts a GST rate of 6%, as discussed above.
GST Rates and HSN Codes for Various Brick Types
Here is a detailed breakdown of the different types of brick HSN codes and GST rates :
|
Description
|
GST rate
|
HSN code
|
|
Sand lime bricks are also used for stone inlay work
|
12%
|
68
|
|
Fly ash bricks, aggregates, or blocks
|
12%
|
6815
|
|
Building bricks
|
12%
|
69041000
|
|
Bricks made from fossil fuels or similar siliceous earth materials
|
12%
|
69010010
|
|
Refractory bricks
|
18%
|
6902
|
|
Bricks made from either pressed or moulded glass
|
18%
| 7016 |
Navigating GST on Bricks: A Smarter Approach
Understanding GST on bricks is crucial for manufacturers, traders, and contractors to ensure compliance and cost-effective business operations. The revised tax rates, composition scheme, and updated registration thresholds directly impact profitability and tax liability. While the increase in GST rates poses challenges, businesses can strategically manage their costs by opting for the right tax scheme, availing input tax credits where applicable, and using a GST calculator .
FAQS - FREQUENTLY ASKED QUESTIONS
What is the current GST rate for fly ash bricks in India?
As per the latest notification, the GST rate on fly ash bricks, aggregates, and blocks (HSN code 6815) is 12%. Earlier, the GST was 5%, but after1st April 2022, it was increased to 12%. This change was introduced to streamline the taxation system and reduce the complexities in claiming input tax credits.
What is the GST rate for red bricks and building bricks?
Red bricks, commonly known as building bricks, fall under HSN code 6904 10 00 and attract a GST rate of 12%. Before April 2022, these bricks were taxed at 5%. However, the rate was revised after the new GST amendments to ensure uniform taxation and better compliance in the brick manufacturing industry.
Can brick manufacturers opt for the composition scheme under GST?
Yes, brick manufacturers can opt for a special composition scheme and pay GST at 6% without availing of the input tax credit (ITC). However, this differs from the standard composition scheme applicable to other small businesses, as the regular composition scheme is no longer available for brick manufacturers.
What is the GST rate for refractory bricks and pressed glass bricks?
Refractory bricks (HSN code 6902) and bricks made of pressed or moulded glass (HSN code 7016) attract a higher GST rate of 18%. These bricks are classified as special materials used in construction and industrial applications.
Has the GST registration threshold changed for brick manufacturers?
Yes, before the new notification, brick manufacturers were required to register under GST if their annual turnover exceeded ₹40 lakh. However, after the amendment on April 1, 2022, the GST registration threshold was reduced to ₹20 lakh.
Can brick manufacturers claim input tax credit (ITC) under GST?
Yes, manufacturers who do not opt for the composition scheme can claim an input tax credit (ITC) while paying 12% GST. However, those opting for the special composition scheme (6% GST) cannot avail of ITC. ITC helps businesses reduce their overall tax burden by allowing them to claim credit for GST paid on raw materials and inputs.
What are autoclaved aerated concrete (AAC) blocks, and what is their GST rate?
AAC blocks are lightweight, precast construction materials made from fly ash, cement, lime, and aluminium powder. In the 55th GST Council meeting (December 2024), the GST rate for AAC blocks containing more than 50% fly ash (HSN code 6815) was reduced from 18% to 12%. This reduction aims to make sustainable construction materials more affordable and widely used.
What is the impact of increased GST on the brick industry?
The increase in GST rates from 5% to 12% has impacted brick manufacturers and traders, increasing their tax liability. While it ensures better compliance, small businesses may face higher operational costs. However, those not opting for the composition scheme can offset their tax burden by availing of ITC, which helps them recover the GST paid on raw materials.
Are handmade or traditional earthen bricks also subject to GST?
Yes, handmade or earthen bricks, including roofing tiles and bricks of fossil meals (HSN Code 6901 00 10), are taxed at 12% GST. These bricks were taxed at a lower rate but are now brought under the uniform taxation bracket.
How can businesses reduce their GST liability on bricks?
Businesses can reduce their GST liability by availing of input tax credit (ITC) on raw materials such as clay, cement, and fuel purchases. Those opting for the composition scheme (6% GST) will have a lower tax burden but cannot claim ITC. Choosing an appropriate scheme based on business needs helps in better tax management.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
