Construction and project billing — progress bills, resources and GST

Why project billing is nothing like product billing

A trader bills a product: pick the SKU, quantity, rate, done. A contractor bills work — the progress of a project over months, measured in labour days, machine hours, material consumed and milestones reached. There is no dispatch to invoice against, no SKU to price, and one "sale" (the contract) produces a long series of bills: an advance, running-account bills as work progresses, and a final bill after handover. If the underlying GST documents are new to you, the pillar guide what is GST billing software covers the foundations; this page is about the project variant.

The structural answer is to bill against a bill of resources: the project is set up once with its resources — labour categories, machines, materials, milestones — and every bill draws lines from that structure instead of a product master. That is exactly how project and resource billing works in Fast Billing Software: the bill references the project, pulls its resource lines, applies GST and charges, and prints a compliant, amount-in-words bill — same GST engine, different source document.

Works-contract GST in plain language

Construction billing in India runs on the GST concept of a works contract — a contract for building, fabrication, erection, installation or repair of immovable property, where goods and services are supplied together. GST deliberately simplified what was once a VAT-plus-service-tax nightmare, but three rules still catch contractors out.

• A works contract is a service. The whole composite supply — cement, steel, labour, cranes — is treated as a single supply of services under SAC 9954. You do not split the bill into goods lines and service lines for GST; one rate applies to the contract value billed.
• The standard rate is 18%. Most works contracts today attract 18% GST; the older 12% concessional slab for specified government works was withdrawn in 2022. Some niches differ (for example certain affordable-housing supplies), so confirm the rate for your contract type with your CA.
• GST is payable on advances. Because a works contract is a service, a mobilisation advance triggers GST when received, not when the RA bill is later raised — the bill then adjusts the advance already taxed. Your billing records must track this or you will pay tax twice or short-pay it.

Place of supply is where the immovable property sits — build in another state and you may need registration or IGST treatment there. Sub-contractors bill the main contractor the same way, works contract to works contract, with input credit flowing up the chain.

RA bills, milestones and the bill of resources

The working document of construction billing is the running-account (RA) bill: a periodic bill for work executed since the last one, presented cumulatively. RA bill 4 says: total work done to date, minus what RA bills 1–3 already billed, equals this bill. Structuring RA bills against the project's bill of resources gives each line a measurable basis:

Whatever the basis, the mechanics are identical: the bill references the project, draws lines from its resources, applies 18% GST (or your contract's rate), adds charges, rounds, and prints with the amount in words. Because every bill hangs off the same project record, the system always knows cumulative billed value versus contract value — which is the number that keeps you from over-billing a project or leaving earned work unbilled. This is the flow the construction and project billing profile of Fast Billing Software implements, with bill-of-resources billing at its core.

Advances, retention and deductions

Between the gross value of an RA bill and the money that reaches your bank sits a stack of adjustments, and each must be recorded against the bill — not remembered.

Mobilisation advance. Typically 5–10% of contract value, paid up front and recovered proportionately from each RA bill. Your billing must show the recovery on every bill and track the unrecovered balance — and, as noted above, GST on the advance was already payable when it was received.

Retention money. The client holds back a percentage (commonly 5–10%) from every certified bill until the defect-liability period ends. Retention is earned revenue you have billed but cannot collect yet — if it is not tracked per project, it is forgotten, and contractors routinely leave lakhs of retention unclaimed years after handover.

Certification cuts and other deductions. The client's engineer may certify less than you billed; water and electricity recoveries, penalty clauses and GST TDS (next section) all reduce the payment. Booking the receipt against the bill with each deduction explicit keeps the project's receivable honest, and a credit or debit note formalises any permanent difference between billed and certified value.

E-invoicing, GST TDS and government work

Two compliance regimes hit contractors harder than most businesses. First, e-invoicing: if your aggregate turnover has crossed ₹5 crore, B2B invoices — including RA bills to registered clients — must be registered on the Invoice Registration Portal for an IRN and QR code. Contract billing is no exception; see GST, e-Way Bill & e-Invoice. Second, GST TDS on government contracts: government departments, local authorities and PSUs deduct 2% GST TDS on payments where the contract value exceeds ₹2.5 lakh. The deducted amount lands in your electronic cash ledger once the deductor files — but only reconciles if your billing records what was deducted against which bill. Material moving to site on your own challans still needs e-way bills above the usual value threshold, even when no sale is happening. Thresholds and rates change; confirm current figures with your CA.

Keeping project billing reconciled

Project billing goes wrong quietly: an RA bill built in Excel double-counts a milestone, an advance is recovered twice, retention is never claimed. The fix is the same discipline manufacturers use with dispatches — every bill references its project, and the system computes the cumulative position. Billed-to-date can never exceed contract value without a variation order; advance recovery runs off the recorded advance balance; retention accumulates per project automatically. And every confirmed bill, receipt and note posts to Tally as the matching voucher with GST, so the books agree with the project register without month-end re-keying. Contractors who also fabricate and supply from a workshop should read the manufacturing billing guide for the dispatch-linked half of their billing, and firms sending material out for processing the job-work billing guide.

What project billing software must do

Most billing tools are invoice-first and dispatch-blind — and project-blind too. A contractor evaluating software should insist on:

Fast Billing Software for construction and project billing is built on this pattern — proven in a live deployment where bills are raised against projects and their resources rather than SKUs — and can run alongside dispatch-linked product billing in the same system. Pricing is indicative and in INR; see billing software pricing and confirm GST treatment of your contracts with your CA.

Frequently asked questions