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18% GST Rate on Govt Contracts May Impact Infra Projects

18 Percent GST Rate Applicable for Govt Contracts

GST surge with 18% for the government contracts shall come into compliance in January 2022 and might influence the infra projects and maintenance of the work in states. In the current times, the GST rate for the government is 12%, and the rate towards the private work contract is 18% GST rate. The same point towards the subsequent year GST rate towards both the government as well as the private contracts shall be identical.

The rate is subjected towards the public-funded government contracts towards the activities like the construction of buildings, commissioning, installation, repair, reconstruction, and maintenance. Also, the work of the historic and memorial buildings’ archaeological sites will get affected. Similarly, the activities like the construction of the canal system, water distribution projects, and laying of pipelines would be negatively influenced. 

The tax professionals shall also signify the surge in the rates will prove to be the load on the small and medium scale government projects which are in halt because of the financial issues. There are various people who had worried about the decision of the government who is attempting to provide much more space to the bigger companies during the time when the cost of the construction has surged.

Also at that time, the framework of the Value Added Tax (VAT) occurred in the space of the tax rate towards the government contract was only 4%. It is notified that when the GST rate was executed then the rate was 18%. Furthermore the same was diminished to 12%. But the same does not draw any benefit to the states as the surging rate was 8%. The same shall build the contractors to meet the amended 8% from their end. But they have not obtained the arrears from the government yet.

But the newer contractors were permitted to imbibe 12% in their analysis, they are also needed to cover the other 6% i.e 18% which is an amended rate w.e.f January.

As per Varghese Kannammppilly, president of Kerala Government Contractors Association, they asked the government to clear out the bills from Jan post to acknowledge the revision in the GST rate which does not been approximated.

Disclaimer:- "All the information given is from credible and authentic resources and has been published after moderation. Any change in detail or information other than fact must be considered a human error. The blog we write is to provide updated information. You can raise any query on matters related to blog content. Also, note that we don’t provide any type of consultancy so we are sorry for being unable to reply to consultancy queries. Also, we do mention that our replies are solely on a practical basis and we advise you to cross verify with professional authorities for a fact check."

Published by Arpit Kulshrestha
Arpit Kulshrestha seeks higher interests in financial services, taxation, GST, I-T, etc. Writes articles with depth knowledge and is extensive for the same. The resources provide effective articles for the products of SAG infotech which provides taxation and IT software. Writing from observations and researching makes his articles virtuous. View more posts
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5 thoughts on "18% GST Rate on Govt Contracts May Impact Infra Projects"

  1. This is what I have been saying ever since this change was announced by the Government but some people are creating doubts without going through the rules word by word. I feel the Government must announce it in clear words instead of weaving threads in a wayward manner.

  2. What is the GSt Rate of Builders to Contractors – 12% or 18%
    Builders – PVT Ltd Company and Contractor – Sole properator .

  3. Sir your comments regarding Rate Revision on Government Contractors seems incorrect
    . The services to Central Government & State Government as per the definition under GST act are to be read in conjunction with Notification of Sept 2027 as amended in Oct 2017 which is now further amended in Nov 2021 .
    The works contract services provided to Government Departments & Government Entities now attracts GST @18% and works contract services to Central Government & State Government will remain unchanged@12% as per the Notification of Sept 2017 .
    Please reconcile & update .
    With Warm Regards

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