Chapter 68 -Understanding GST on Bricks: HSN Code & Tax Rates Explained

• 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.

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%

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.

Here is a detailed breakdown of the different types of brick HSN codes and GST rates :

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 .