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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11 Comments

  1. Rajendiran says:

    we are government drilling(soil investigation)contractors, our work estimate was without GST rate only for IT and ST tax rules applicable. our work agreement was before GST implement time (before June 2017)that time with out GST agreement signed for quoted less then 1% estimate rate . but, now the work bill is ready to pay from government department. so now GST is applicable are not. please reply me suppose GST applicable whose responsible paid the GST amount.

  2. Kishan Jadhav says:

    I work as subcontractor In civil nfrastructure line and my annual turnover is less than 20 Lakh. I had registered my company in GST act, so my question is how many % I need to pay as GST or weather GST is applicable to Me?

    If work is done on only labour contract base then how many % of GST is applicable?

  3. 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

  4. 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.

  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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