According to the previous provisions, a works contract is a combination of the transfer of goods and services. Under the GST regime, the service tax applies only to work contracts on the service part. As per the listings, the construction of the building, maintenance, and repair of plant and machinery, and installation, repair, and alteration of any movable or immovable property come under a works contract.
Previous Taxation System for Works Contract
According to the old law, a works contract is composed of three types of taxable activities, which include the supply of goods and also the supply of services. If a new product is manufactured under the work contract, then such a product is taxable.
Whereas, VAT or sales tax levied on the transfer of property in goods pertains to carrying out a work contract, while Service tax will be applicable only on the services portion involved in the execution.
Latest Update
- Authority of Advance Ruling of Karnataka has been ordered to 12 per cent GST applicable on services of work contract associated with the making of a police station undertaken by Karnataka Housing Board. Read more
- The GST AAR Telangana has issued the order under section 98(4) rule 104 of CGST/TGST for M/s. Satya Dev Bommireddy. Read more
Works Contract and Its Provisions under GST India
GST Schedule II clearly announced that the following points are considered under the supply of service:-
- It includes all the works related to the construction of a complex, civil structure, building or a part thereof, which also includes a complex or building tagged for sale to a buyer, wholly or partly.
- Secondly, the works contract included in the transfer of property in goods (whether as goods or in some other form) involved in the completion of a works contract.
But as under the GST Regime, “One Nation, One Tax” has taken the place of the confusion related to the tax practices. Which says that the works contract will be considered under services and taxes would be deducted accordingly (not as goods or part goods/part services).
Under the current taxation structure, the states have different VAT schemes and different composition schemes for different VAT rates. And this procedure of work contract as service and not as a supply of goods would bring confusion among users, which requires more clarification & answers to the work contracts. Also, according to the recent government announcement of the tax rates, it is known that service tax is very tedious with 60% abatement on new works contracts and 30% abatement on repair contracts.
Recommended: GST vs VAT: Simple Way to Describe the Differences
Determine Time of Supply for Works Contract:
For determining the works contract date earliest, section 13(2) includes the time of supply points to be considered, which are:
- The date on which the invoice is issued by the supplier or the final date on which it is required to be issued. Generally, it is within 30 days from the completion of the works contract
- The receipt containing the date of payment or the date on which the payment is credited to the account by the supplier
- The date earlier from the above is a considerable first
- If the invoice is not generated at the start, then the date of completion of the services is considered
Place of Provision: The Origination of Supply
The place of service determines which jurisdiction the particular works contract comes into. The place of provision(POP) is informed based on the supply of immovable property and other than immovable property.
1. Supply Of Services Of Immovable Property
According to section 9(4) of the IGST Act, the Place of a provision in the case of immovable properties is where it is situated regarding the services of:
- Architect
- Surveyors
- Engineers
- Estate agents
- Interior decorators
- Coordination services for the construction work
2. Supply Of Services Other Than Immovable Property
If the supply is made to a registered person, then the place of supply will be the location of the recipient of services
If the supply is made to an unregistered person, then the place of supply will be the location of the recipient or in other case location of the supplier.
No Availability of Input Tax Credit
The new GST Regime has declared that input tax credit is not available for:
- All the works contracts for the service supply for constructing an immovable property, excluding plant and machinery, except where it is an input service for the further supply of works contract service
- Goods or services accepted by a taxable person for constructing immovable property with his own account, excluding plant and machinery, even when used for use in the course or furtherance of business.
Looking at the example, if in case, a builder or contractor is not entitled to get ITC at the time of construction of the project but he can avail ITC for the input services at the time of supply under the works contract. This sentence creates confusion regarding the provision.
No description of Abatement
While the abatement is not under the laws of works contract, the current tax laws provide service tax at 15% and are divided into 2 categories i.e. 40% for the new work and 70% for the maintenance and repairing work.
The government has now revised the GST rates on works contracts to 12 per cent, however, this new rate is only for the work contractors. And other than this, the buyers will have to pay 12 per cent GST on the affordable housing plans along with the ITC claim. According to the calculations, the 18 per cent GST is only applicable on two-thirds of the total house value, which in turn makes the tax scenario 12 per cent on the overall cost of the house.
No Availability of Composition Scheme
Under the GST tax scheme, the composition scheme is not available for the work contractors as the nature of the business is serving, as the composition is available only for goods supply. This will affect the small sub-contractors and will subsequently increase their cost of compliance.
The GST rules & regulations still demand some clarification over the issues regarding input tax credit and the composition scheme. Various rules and regulations which are rolled out for the work contractors are not feasible and may increase the cost of compliance. All the points must be safeguarded to create a healthy environment for this particular area of industry.
I got my home remodeled and the contractor has listed cost of various items. One question I have is wrt GST of 18%.
The individual costs he has listed( Bought-out items) like Camera, Grills, Tiles, Cement, Paint etc already has GST added in the line items. In addition he is adding GST of 18% on overall cost.
My view is, since the costs listed is inclusive of GST for bought-out items, I should not be paying GST again. This will lead to me paying GST two times.
Sir,
My client contract with labor contractor for labor supply, for the machine, operate and goods loading & unloading, my client attract under GST act
If it falls under works contract service then only attract RCM otherwise not
Sir,
I am a building contractor. All projects value around Rs 50 lakhs.
At what RATE of GST should I charge for construction of:
1.Single residential house for my client on HIS PROPERTY.
I shall be supplying BOTH material and labour, the land is not mine
2. School building for my client on HIS PROPERTY.
I shall be supplying the material and labour, the land is not mine
Please let me know the rate and the MOST IMPORTANTLY the relevant section
NUMBER and notification of the GST act mention the rate
Thank you
1. TDS amount of 2% Deducted by Govt.office . can we avail an ITC on it.
2. Cement steel etc Can we avail ITC on it.
3. What to do if material bought from an unregistered person.
4. which one is applicable for taxable value. The net amount or gross amount.( Amount credited into our account or amount that release before any deduction like labour cess, 2%gst, Etc
1. As per Sec. 51(5), a deductee can claim credit, of the tax deducted and reflected in the return of the deductor in such manner as may be prescribed in his electronic cash ledger. Hence it is presumed that credit in the electronic cash ledger will flow automatically from certificate electronically made available in Form GSTR-7A.
2. No ITC is available for goods and services for construction of immovable property on his own account. ITC will not be available even if such goods/services are used in the course or furtherance of business,
3. since the seller is not registered under GST, therefore no GST is payable by you.
4. GST is levied on transaction value which is “the actual amount paid or payable for the goods”.
I have given Turnkey project to a contractor for the demolition of old house and reconstruction of my residential house ( stilt parking at GF and then four residential floors – for self-use of the family). As per GST rules, it will fall under Works Contract under services and will attract 18% GST which will be charged by the contractor to me. However, I want to know whether the contractor will be entitled to avail ITC on inputs ( used by him for construction e.g. construction material)?
Input credit will be available to the contractor for the construction material. read section 17(5) of the CGST Act.
Sir,
section 17(5) of CGST Act only talk about input services received for further supply of works contracts service. There is no clarity given about input tax credit for input goods purchased by the contractor. Also in Authors reply in given below comments, two answers are given. so please give some clarity in this issue.
Could you tell me if finishing/ completion services like painting, etc., are a part of a single works contract? Or are they separately taxed?
I HAVE RAISED A INVOICE TO ‘PWD’ IN WEST BENGAL. GST RATE WAS APPLICABLE @12%. NOW, THE DEPARTMENT SAYING THAT 2% OF TAX AMOUNT WILL BE SUBMITTED BY THEM ON OUR BEHALF AND REST OF THE TAX AMOUNT WILL BE PAID TO US. IS THIS RIGHT WAY. THEN HOW WOULD WE SHOW IT IN GSTR 3B AND GSTR 1 RETURN. PLEASE SEND ME SOME HELPFUL ANSWER TO MY ABOVE MAIL ID. THANK YOU
Sir as you are dealing with Govt. department, from October 2018 they are required to deduct TDS @2 % from the amount paid to you. You can claim the credit of the same after accepting such amount populated in your TDS credit received tab. Such credit can be claimed in GSTR-3B.
वर्क्स कॉन्ट्रॅक्ट मे eway bill कैसे बनाना है, सिर्फ सप्लाय मटेरियल का बिल बनने के बाद ऍप्लिकेशन बिल भी eway portal पर बनाना चाहिए क्या?
Only e-way bill of material supplied from one place to another need to be made.
1. Sir, I am govt contractor. We drilling the bore and supply and installation of the submersible pump and other items also for govt. Then what will be GST rate?
2. Sir, we are doing the operation and maintenance of water supply scheme of govt. What is GST on it?
3. we supply laying and joint the pipeline for govt what will be GST on this work
Please tell us GST rate on all three different project and how we can get the exemption on GST.
Thanks
The Central Government vide Notification No. 20/2017-Integrated Tax (Rate), date 22-08-2017, has amended the GST rate on Government contracts to 12 percent from 18 percent. This rate would be applicable for ongoing as well as new contracts
I WANT TO ASK ( ideal in the construction of roads bridges and dams):
1) Whether construction services comes under works contracts services ( If I use my own material or if I don’t use )
2) The rate of GST on it.
3) Availability of input tax credit.
4) What if I am providing the service to the main contractor who is providing service to govt as works contractor
Sir,
I work as work contractor supplying manpower service received bill from govt department has submitted GST 3B. Whether I have to submit GSTR 1, if yes then which point I have to fill?
If services provided (works contract) to the municipal corporation who will liable to pay GST. GST rate is 12 %. If the service provider has to pay GST then, how to calculate GST. Suppose my contract price is 100 shall I pay 12% on 100 or think that it will inclusive of 100. Because municipal is not paying us.
In this case GST is inclusive of 100.
Works contract completed on March of 2014. Final payment received in October 2017. The Invoice is not raised for final payment. GST applicable for final payment?
No tax shall be payable on a supply of goods made before appointed date where a part of the consideration is received after the appointed date but a full duty or tax payable has already been paid under the earlier law.
AB (Joint Venture) received WCS contract from the government. where A (Sub-Contractor) is providing WCS to JV and charging 12% GST as per new amendment. but B (Sub-contractor) is only providing service (not WCS) then what percentage of GST should be charged by B to JV? 12% or 18%. even if B charge 18% to JV, JV is only giving them 12% because they are going to raise an invoice to government @12% only. Therefore 6% cost will be borne by B. Can this be claimed as refund afterwards if paid @ 18% to the government?
The rate of GST depends upon the type of services provided by B to JV and as per new amendment, only WCS provided by the subcontractor to govt are covered under 12% slab.
Suppose I am filing GST of December Month and in that month I received the amount of previous year month Contract Work. Can I show that amount in filing GST of December Month?
In GST returns, data related to invoices issued in a concerned period have to be shown.
If I take a subcontract of a govt as well as private work from a contractor what GST I have to bare? if I transport my vehicles in sand murrum dhulai what liability for me
In case you take a subcontract from a contractor, who provides services to govt., then GST will be 12% / 5% ( as the case may be ).
Please explain 5% case
Sir, we are mfg. co. of (SAW) pipes & we are taking works contract of supplying & installation of pipelines i.e. for MIDC. Municipal Corp. HPCL BPCL IOCL. current tax rate is 18% for m.s. pipes. sometimes we are getting direct works contract through the company, or some time through the main contractor. in 25th GST Meeting for WCS reduced rates from 18% to 12 %.
We want to know, the reduced rate is it applicable to us? & is it applicable for service & supply in both cases? we are confused, please give us advice. For your more info copy pasted the detailed draft from GST meeting. as below———–
12.To reduce GST rate (from 18% to 12%) on the Works Contract Services (WCS) provided by sub-contractor to the main contractor providing WCS to Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity, which attract GST of 12%. Likewise, WCS attracting 5% GST, their sub-contractor would also be liable @ 5%.
If you are providing services to the main contractor, who in turns providing the services to govt., then GST will be levied @ 12% / 5% accordingly and these amended rates will be applicable from 25th Jan 2018.
Dear Sir,
In case of Government Contractor, is reverse charge applicable on them if they purchase materials & other things from Unregistered persons. Second, the GST amount would be charged on the total consideration or only on the service charges claimed by the Govt. Contractor.
Reverse charge on purchases from an unregistered dealer has been suspended till 31.03.2018. GST has to be charged on the total consideration charged.
We are providing O & M (Operation and Maintenance) service for rural water supply to District Board ( Government). Monthly bill value is INR 2.2 Crores. what is the GST % claimable. What is the GST applicable our subcontractors? The contract involves mainly manpower engagement.
Please clarify.
12%