As per the Notification No. 20/2017-Central Tax (Rate) New Delhi, the 22nd August, 2017 and Notification No. 24/2017-Central Tax (Rate) New Delhi, the 21st September, 2017, GST is chargeable @12% on Specified Work Contracts and Specified Construction service.

With reference to above, GST @12% is not applicable on subcontractors who are providing services by way of works contract to another contractor (main contractors who has received work contract from Govt. department) providing works contract services which are taxable @12% by way of Notification No. 20/2017-Central Tax (Rate) New Delhi, the 22nd August, 2017 and Notification No. 24/2017-Central Tax (Rate) New Delhi, the 21st September, 2017. Therefore GST Rate is 18% for Sub contractor providing work contract service to main Govt. Contractor.

However in the Pre GST era, subcontractor were exempt under service tax by Notification No. 25/2012 clause 29(h) for providing services by way of works contract to another contractor providing works contract services which were exempt; but no such notification available in GST till the time.

Due to non availability of such notification sub contractor service are taxable @18% which leads to excess inflow of credit @6 % (approx) to main Contractor and blockage of Working capital.

Therefore amendment is required in respect of GST rate for sub contractors providing work contract service to another contractors which are taxable @12% by way of Notification No. 20/2017-Central Tax (Rate) New Delhi, the 22nd August, 2017 and Notification No. 24/2017-Central Tax (Rate) New Delhi, the 21st September, 2017.

Thanks & Best Regards,

CA Ankit Kumar Jha (caankitjha@gmail.com)

ACA, M.Com, B.Com  

Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice.

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8 responses to “GST: Status of Sub Contractors under Work Contract/Govt. Construction Service”

  1. MADHUKAR NAIK says:

    Definitely subcontractor rates have to be same as main contractor otherwise there is huge accumulation of GST ( with no refund provision) with the main contractor

  2. yumnam dijen singh says:

    i receipt Rs. 11,20,000/- (gross amount rs. 10,00,000/- + gst 1,20,000/-)from govt. work dept. and i paid rs. 9,70,000/- to sub contract X after deduction of TDS 1% & Commission 2% should i paid gst on commission receipt from sub contract.

  3. RAJESH says:

    Working of subcontractor goods purchase for 75% labour charges 25% total work 100% Pls. billing of GST Rate

  4. RAJESH says:

    I AM WORKING OF BUILDER (SUB CONTRACTOR) PREPARED THE BILL PLS. ADVICE THE GST

  5. Amit Rai says:

    My view : construction, Erection etc of Road, Tunnel, Bridge by main contractor or sub-subcontract for general public use will attract GST @ 12% for all.

  6. Amit says:

    Also Under Service tax regime, SLUM REHABILITATION WORK is exempt and also subcontractor is exempt.

    But under GST , there is no such exemption and clarity..

  7. RAJU MANGRULKAR says:

    the case will be even more worst whether irrigation -earth work canal work with 75% soil work of total project -gst rate is 5%

    how gst rate of 18/12/5% are to be feeded in gstin portal in gstr1 & 3 b for different rates of gst for same sac/hsn code.

    gst needs to be re defined for govt road and irrigation projects which were exempt from service tax.

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