GST on interior design work: fee, works contract, and the mistake in most quotes

Two studios can do the same job and be taxed differently, and most of the confusion about GST on interior work comes from not noticing which one you are. It turns on a single question: are you selling advice, or are you selling a finished room?

Design fee and works contract are not the same supply

If you produce drawings, specifications and a BOQ, and the client appoints their own contractor to build it, you are supplying a professional service. That sits under SAC 998392 — specialty design services, including interior design.

If you take the job turnkey — you buy the ply, you employ the carpenter, you hand back a finished kitchen — that is a works contract, SAC 9954, because you supplied goods and services together as one indivisible job. Residential and commercial work sit under different sub-codes.

Both currently attract 18%. So designers often conclude the distinction does not matter. It matters for three things: what you write on the invoice — and when in the project you raise it — what input credit you can claim, and what happens when you try to split a quote.

The mistake: splitting materials out to save tax

The reasoning goes — materials are goods, labour is a service, so bill them separately at whatever rate each attracts and the client pays less overall.

This does not work, and it is worth understanding why rather than just being told. When goods and services are supplied together as a natural bundle in the ordinary course of business, GST treats it as a composite supply and taxes the whole thing at the rate of the principal supply. A turnkey interior is the textbook example: the client is not buying plywood and separately buying carpentry, they are buying a fitted wardrobe. You cannot decompose it at invoice time to reach a lower rate.

Where the split is real — a genuinely separate supply of furniture the client could have bought from anyone, with its own contract and delivery — it can be billed as goods. But that has to be true of the arrangement, not just of the invoice layout.

What changed in September 2025

The 56th GST Council rationalised the slabs with effect from 22 September 2025. The 12% and 28% brackets were abolished, leaving 5%, 18% and 40%, with 40% reserved for luxury and sin goods. For interiors the practical effect was that several material categories which had been at 28% — a number of plywood and laminated wood lines, and glass and stone furniture — came down to 18%, and finished furniture became broadly uniform at 18% regardless of what it is made from.

This is why older articles and older BOQ templates disagree with each other, and why a rate you memorised in 2024 may quietly be wrong. If your template still carries 12% or 28% anywhere, it predates the change.

Put the rate on the line, not at the bottom

Even when everything on a job is 18%, the tax belongs on each line rather than as one figure at the end. Three reasons, in increasing order of how much they cost you:

The kitchen cost calculator shows what that looks like on a real build-up: every line carries its own rate, and the tax is a figure you can point at rather than one that appears at the bottom.

• A registered client wants to see the split to claim their own credit.
• When a client removes a line — and they will — a single bottom-line tax figure is now wrong, and someone has to notice.
• If any part of the job is at a different rate, a blended figure hides it. You will find out at filing, not at quoting.

Input credit is the part people leave on the table

If you are registered, the GST you paid on materials, and on services you bought in, is generally creditable against the GST you collect — provided you have a proper tax invoice from a registered supplier and the supplier has actually filed. That last condition is the one that bites: a cash purchase from an unregistered vendor is not merely informal, it is a cost you cannot recover.

Which makes vendor registration a commercial question, not just an administrative one. A supplier who is 3% cheaper and unregistered may be 15% more expensive after credit.

What to do with this

• Decide, per project, whether you are supplying a fee or a works contract, and say so in the agreement.
• Do not split a turnkey job into goods and services to reduce tax.
• Carry GST per line in your BOQ so the bottom line survives a revision.
• Check any rate that predates 22 September 2025, including the ones in your own template.
• Ask your CA about your specific mix. It is a short conversation and it is the only one that is authoritative.