GST on Bricks: Understanding the Latest Rules & Impact

The government has recently explained how GST will apply to bricks under the Special Composition Scheme and the regular scheme. New rules will take effect from 22 September 2025. These changes will create stable rates for most brick types, introduce a lower rate for sand-lime bricks, and establish clear eligibility criteria. Here’s what brick manufacturers, sellers, builders, and buyers need to know.

What the Rules Say

For all kinds of bricks except sand-lime bricks:

• 6% GST without Input Tax Credit (ITC) if you choose the Special Composition Scheme.
• 12% GST with ITC if you use the regular GST route.

There is a turnover threshold of ₹20 lakh annually. If your brick business exceeds this amount, you must register under GST and follow the relevant scheme.

Sand-lime bricks (and stone inlay work) are treated differently. Their GST rate is now 5% with ITC. They cannot use the composition scheme for bricks, meaning they cannot opt for the 6% without ITC or the 12% with ITC that applies to other brick types.

Why This Matters

These updates are important because:

• Previously, different types of bricks had varying tax treatments, especially regarding ITC claims or higher rates under regular schemes.
• The clearly defined turnover threshold helps smaller brick producers understand if they must register under GST or can remain unregistered (if turnover is below the threshold).
• Many brick makers felt the administrative burden of the regular scheme (with ITC) was too high. This clarity will help them choose the best option for their business.

What Has Changed and What Remains

• The rate structure for non-sand-lime bricks (6% without ITC, 12% with ITC) remains the same under the composition scheme.
• The GST rate for sand-lime bricks has been reduced to 5% with ITC, providing some relief compared to earlier rates.
• The turnover limit to determine eligibility for these schemes is set at ₹20 lakh.

Who Is Affected

• Brick makers, kiln operators, and traders handling bricks other than sand-lime whose annual turnover exceeds ₹20 lakh will need to decide whether to opt for the composition route or the regular scheme.
• Manufacturers and sellers of sand-lime bricks will benefit from the lower rate.
• Builders, contractors, and purchasers will see price changes based on the type of brick they buy and whether their supplier is in the composition or regular scheme.
• Smaller brick businesses near the threshold should carefully track their sales and turnover to know if they need to register and comply with GST.

Pros & Cons

What Businesses Should Do

1. Check Your Turnover: If your business turnover exceeds ₹20 lakh annually, you are in the GST registration range under these rules.
2. Classify Your Brick Type Correctly: Be sure to know whether your product is a sand-lime brick or a non-sand-lime brick. The applicable rate will depend on this classification.
3. Choose Your Scheme:
   • If you don't need ITC and want lower compliance, go with the composition scheme (6% without ITC).
   • If you purchase many inputs with GST and want to offset that cost, the regular scheme (12% with ITC) might be better for you.
4. Adjust Pricing and Contracts: Starting 22 September 2025, ensure your invoices and contracts reflect the correct GST rate.
5. Maintain Records and Invoices Properly: Whichever scheme you choose, keep the required accounts and proper invoices, especially if you are opting for the regular scheme to claim ITC.

What This Means for Buyers and Builders

• If you buy bricks from suppliers under the regular scheme, you will benefit from ITC. However, if your supplier is under the composition scheme, you will not receive ITC on those purchases.
• The reduced GST rate makes sand-lime brick products more cost-effective.
• Price comparisons between suppliers (composition versus regular) will be more important, and buyers may negotiate differently.

Possible Issues and Things to Watch

• Definition and Classification Disputes: The definition of a "sand-lime brick" may be unclear in some cases, leading to disputes and compliance risks.
• Transitional Challenges: Orders or inventory that span before and after 22 September will require careful handling regarding invoicing and compliance.
• Informal Sector: Many small brick makers may not be fully formalized, making compliance and registration a potential hurdle.
• Input Costs: Increases in fuel or raw material costs, or differing tax rates on these inputs, may diminish the benefits of lower GST rates.

Conclusion

In summary, the updated rules provide clarity and stability for how bricks are taxed in India:

• Non-sand-lime bricks: 6% without ITC (composition) or 12% with ITC (regular).
• Sand-lime bricks: 5% with ITC—a positive change.
• The turnover threshold for registration is set at ₹20 lakh.

If you're in the brick business, either in manufacturing or trading, or if you buy bricks, now is the time to review your tax strategy, accurately classify your products, and adjust your pricing contracts. Knowing which scheme works best for your situation can save you money and help you avoid compliance issues.

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