CA Ankita Garg
Works contract is a mixture of goods and services but it is neither a composite supply nor a mixed supply as it has been defined as per Sec. 2(119) of CGST Act. As per the said section “ Works Contract” means a contract for building, construction, fabrication ,completion, erection, installation , fitting out, improvement , modification, repair ,maintenance, renovation, alteration, or commissioning of any immovable property wherein transfer of property in goods ( whether as goods or in some other form) is involved in the execution of such contract. Thus even when there is a transfer of property in goods during execution of any works contract , such supply will be included in Works Contract only. For example ,construction of a new building, installation and commissioning of Cooling Towers, etc.
Further, GST Schedule II (entry 5(b)) clearly states that the following activity shall be treated as supply of service:-
“Construction of a complex, building, civil structure or a part thereof , including a complex or building intended for sale to a buyer, wholly or partly , except where the entire consideration has been received after issuance of completion certificate, where required , by the competent authority or after its after occupation, whichever is earlier.” Thus GST with its “One Nation One Tax” has removed the confusion regarding the tax treatment. Further there is one more clause in Schedule II ( Entry 6(a)) which states that the following composite supplies shall be treated as a supply of services namely:-
“ Works contract under S. 2(119)”
This means works contract will be treated as service and tax would be charged accordingly (not as goods or part goods/part services) which was done in the current regime. Consequently GST rates, time of supply rules, place of supply rules, valuation rules as are applicable on services will apply to works contracts. While deciding whether a supply is intra-state or inter-state, the place of supply of service shall be applicable to the Works contract.
Currently, supply of goods is taxable in the form of VAT and Service tax is applicable on the service component. Under the current regime, different states have different schemes for VAT. There are different composition schemes with different VAT rates. Service tax too is complex with 60% abatement on new works and 30% abatement on repair contracts. GST will solve such with a much simpler straightforward calculation.
Now, let us understand the different provisions applicable to a Works Contract Service Provider in the GST scenario:-
1. Registration:- Section 22 says that every supplier shall be liable to be registered under GST Act in the State or Union territory, other than special Category states, from where he makes a taxable supply of Goods or Services or Both, if his aggregate turnover in a Financial Year exceeds Twenty Lakh rupees. Provided that where such person makes taxable supplies of goods or services or both from any of the special category states , he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees.
Explanation:- The expression “ Special Category States” shall mean the states as specified in sub-clause (g) of clause (4) of Article 279A of the Constitution.
Construction sector over the years has got used to payment of taxes under simplified composition schemes on the total project value without any Input Tax Credit. Due to unorganized nature of this sector, there shall always be a class of contractors who may not be able to maintain records as per the prescribed norms. However under GST Regime there is no such scheme of taxation. Section 10(2)(a) of CGST Act further states that a person supplying services other than Restaurant services is not eligible to opt for composition scheme.
Hence, a Works contract Service provider whose turnover exceeds Twenty lakh rupees or Twenty lakh rupees in case of specified states is required to get himself registered as a normal supplier( not eligible for composition). This will be a big blow to the small sub-contractors who cannot opt for composition scheme. They will be forced to register for normal taxation scheme increasing their compliances and costs.
Now the question arises in which state the Works Contract service provider has to take registration?
Let us understand this by way of an example, ABC Ltd. is engaged in construction of Residential Buildings in Delhi, Mumbai, Hyderabad and Punjab.
In this case, the Company should obtain registration in all the states where it has a Project office.
2. Levy and collection
There shall be levied a tax called the CGST / SGST or IGST on all intra-state or inter-state supplies of goods or services or both . Hence, GST will be levied based on the place of supply on the rates of services.
3. Time of supply
Time of supply means the point in time when goods/services are deemed to be supplied/ rendered. It enables us to determine the rate of tax, value, and due dates for payment of taxes. The liability to pay CGST / SGST will arise at the time of supply as determined for goods and services.
Time of Supply shall be as under for the purpose of determining a regular works contract under GST:
Section 12(2) says that the time of supply of services shall be the earliest of the following dates, namely:—
(a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or
(b) the date of provision of service, if the invoice is not issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or
(c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply.
If the supplier receives an amount up to One Thousand Rupees in excess of the invoice amount, the time of supply for the extra amount shall be the date of issue of invoice (at the option of the supplier).
Example:
(a) Date of invoice 25th May 2018
(b) Date of receipt of payment 12th July 2018
(c) Date when supplier recorded receipt in books 12th July 2018
Time of supply will be 25th May 2018
Time of Supply in case of continuous service
Time of supply in this case will be
1. Where the due date of payment is ascertainable from the contract, the date on which the payment is liable to be made by the recipient of service, whether or not any invoice is issued or any payment has been received by the supplier of service
2. Where the due date of payment is not ascertainable from the contract, each such time when the supplier of service receives the payment, or issues an invoice, whichever is earlier
3. Where payment is linked to the completion of an event, the time of completion of that event
Time of supply under Reverse charge
Reverse charge means the liability to pay tax is on the recipient of goods/services instead of the supplier. In case of reverse charge, time of supply shall be earliest of the following dates-
The date of payment
OR
The date immediately after SIXTY (60) days from the date of issue of invoice by the supplier
Example for reverse charge:
1. Date of payment 15th July 2018
2. Date of invoice 1st July 2018
3. Date of entry in books of receiver 18th July 2018
Time of supply of service 15th July 2018
If it is not possible to determine the time of supply under (a) or (b) , the time of supply shall be the date of entry in the books of account of the receiver of service.
For clause (a)- the date of payment shall be earlier of-
1. The date on which the recipient entered the payment in his books
OR
2. The date on which the payment is debited from his bank account
4. Place of Supply:
Place of supply in case of WCT shall be governed by place of supply of service rules which are as follows:-
Location of the immovable property is used to determine the taxability of a transaction involving supply of service. i.e.in case , in case, the immovable property is situated in the same state as that of the place of registration , CGST and SGST shall be levied and in case, the immovable property is situated outside the state in which the registration is obtained , IGST will be levied.
5. Input Tax Credit
Section 17 (5)( c) : Input Tax Credit shall not be available in respect of the following, namely:
“ works contract services when supplied for construction of an immovable property ( other than Plant and Machinery) except where it is an input service for further supply of Works contract service” The restriction does not apply to plant and machinery and also in case the input services are further used for supply of Works Contract service under GST( Contractor can avail the ITC in respect of services availed from the sub-contractor).
6. Abatement
No abatement has been prescribed for works contract service under GST so far as was there in the earlier regimes ( Pre- GST).
The article has been written by CA. Ankita Garg who can be reached at [email protected]
1. i have given a contract for building my house on 14-04-2017. inluding labour+materials and it has reached completion stage ,what is the rate applicable pre gst and rate applicable post gst ,is ther any option of negotiating on the input tax credit , is the gst payable on the entire amount paid by me
what if im a contractor who took contract of a building for rs 10,00,000 and i gave it to some other person on sub contract. and while giving him payment, do i need to pay gst or him
I am Manpower Supplier Receiver & engaged on Civil Works shall I have avail input Tax Credit ??.
Dear Sir,
Our firm is a Sunmica manufacturing firm. Weather we can deduct WCT on Building contractors. Already party is charging CGS & SGST @18%.?
Contractor executed a work for governement and completed it in June 2017. But the payment was made in august 2017. Whether GST is applicable here or not and at what rate. Please clarify sir
Dear Sir
What about ITC of sub contractor?
I had received some materials from our HO in IGST-12 % and i sold these materials in CGST-6% and SGST-6%. After that i gave these invoices to our consultants and they submitted in GSTR- 3B and said me that no tax is return. But one thing we couldn’t know that how not to pay tax .
A company had supplied labour service for Structural fabrication of Plant and charged 18% GST (CGST & SGST). We would like to know whether we can claim Input credit as we are registered dealer.
I AM ELECTRICALS CONTRACTOR
WE SUPPLY OF MATERIAL WITH INSTALLATION SERVICE PROVIDE SO PLEASE WHICH GST RATE APPLICABLE ON GST UNDER WHICH SCHEME
Dear sir,
At the time of making the payment before 30.06.2017 we deduct @2% WCT from the bill of the contractor as now GST is applicable w.e.f. 01.07.2017 it may please be advised in the cases where the invoice is raised to our office before 30.06.2017 or on 30.06.2017 and work has also been completed before 30.60.2017 but we have to release the payment now in the month of August, 2017, what will be the deduction on account of GST.
Please clarify.
I AM GOVT CONTRACTOR AND COMES IN WORK CONTACT SCHEME, SUPPOSE I HAVE TAKEN A GOVT CONTRACT FOR REPAIRING OF SPLIT AC’S, IF I PURCHASE THE MATERIAL FOR REPARING THE AC’S, MAY I GET THE INPUT TAX CREDIT WHILE FILLING THE GST RETURN
Sir,
Before GST i have work order for hiring of vehicle on par day basis with inclusive of all taxes.My rate was rs 850 per day. And value of work order is limited to rs 2 55000/- NOW after gst the agency has revised my per day rate to 720 exclusive of gst @18% .Isthis procedure ok or otherwise
we are electrical work contracts we doing the work for govt work we are doing work supply and fixing of street light works erection insatition etc completed
Please Suggest.
as one of our contractor is providing Painting Service on board.
With Supply of paint and labour.
Weather same is consider as Work Contract Service or as define in Work Contract for Immovable property.
Please confirm the GST rate and SAC Code.
As he providing the above service in movable one.
I AM A GOVT CONTRACTOR I AM AWARDED A TENDER AND ALSO COMPLETE OF EXCAVATION WORK BY MANUAL MEANS AND THEN HOW MUCH GST I HAVE TO PAY
I undertake repair work of industrial sewing machine .During this process we also replaces the defective parts and charge for it and also take labour charges .Does this activity come under work contract ?
Dear Sir
We are a society name CREST, Chandigarh working under Chandigarh Administration and we are doing the work of Installation of Solar Power Plant in Chandigarh under Work Contract on a lump sum basis rate for example we allot the work of Design, Manufacture, Supply, Erection, Testing and Commissioning along-with Operation & Maintenance for 10 years for total aggregate capacity of 175kWp (95kWp + 80kWp) Grid Interactive Rooftop SPV Power Plants at 2 No. different sites in Chandigarh with M/s. Hero Solar Energy Private Limited, New Delhi for a cost of Rs.1.16 CRORES
At the time of making the payment before 30.06.2017 we deduct @6% WCT from the bill of the contractor as now GST is applicable w.e.f. 01.07.2017 it may please be advised in the cases where the invoice is raised to our office before 30.06.2017 or on 30.06.2017 and work has also been completed before 30.60.2017 but we have to release the payment now in the month of August, 2017, what will be the deduction on account of GST.
Please clarify.
Regards and Thanks
PARVESH SAHNI,
A.O., CREST, CHANDIGARH
I AM A GOVT CONTRACTOR I AM AWARDED A TENDER OF EXCAVATION OF POND AND IN THIS I HAVE TO USE ONLY MACHINERY THEN HOW MUCH GST I HAVE TO PAY
I am painting contractor for reputed builder they want me to register for gst how will it help them & how it is use for me, can I claim any input and I need a clarification I.e if I have purchased a material from paint shop he will give invoice in the project name, can I take the material on my name and reissue an invoice to the builder with my gst number is that possible
Sir
I need clarification for the following work ,we are a subcontractor
1.Culvert,stone pitching work PVC pipe and Hume pipe laying all these work coming under in one contract shall i mentioned the following SAC “995428”
It is suitable, Please confirm
Our firm undertakes supply installation testing and commissioning of air-conditioning plants for various govt departments, before the implementation og GST the tax was deducted at source on complete contract @ 12.6%now I would like to know whether we will have to bill supplies and services separately, although our contract is composite and there is no bifurcation of cost of material and installation
We are doing “outsourcing of labour works” as well as maintenance works with supply of materials with Central Govt. Deptt. and as per tendering process the measurements and bill is finalized by the Deprtmental Engineers. The rates quoted are inclusive of all taxes.
We want to know :-
1. what shall be the status under GST where tender agreement valid for say 12 months or 18 months, was finalized long back say prior to 6 months or 2 years.
2. Physically the work had been completed long before say 6 months before but it could not be ‘accounted for’ since preparation & finalization of bill is solely in the Dept. Engineer’s scope. We can account for the same only after receipt of payment in our account, which may be after 1st july 2017 (after imposition of GST Act).
3. What should be the status and GST rate applicable for “Pure labour outsourcing works” continued under Central Govt. tender agreements, starting well before the imposition of GST Act and still continued as per terms of the contract agreement.
Please help & guide for which we shall remain ever greatful.
Thanks.
whether FOC material attract GST in GOVT project
in Case yes how we get input and treated as urd purchase under reverse mechanisim
hello,
I am a interior contractor. i buy various materials like ply, cement, tile, steel, light electrical, pvc flloring & complete works with labours with varied tax.
supplier giving me GST bills of different taxes. is it correct.?
what should be my tax rate & billing?
i am painting contractor and i do painting with labour and material.
whats will be applicable gst with material painting and only labour work painting
i m a plumber, i taken new building plumbing work with material and labur , how ken i make my invoice
in gst. exm. i taken works rs. 20000/- per unit with material and labour, how i take input credit. in gst. please gide me.
thanking you.
mohan
can works contract service provider take ITC of all input goods and services ? restriction placed is on ITC of works contract services by recipient of service and not for provider ? kindly clarify
our orgnisation is U.P.Govt. undertaking (Corpn). 100% equity of Govt. Plz Help me as below-
1-we recd. fund from govt to build colony and office of u.p.police deptt. What,s our laibilty under GST as a service provider.
2. We handover the work to Govt. after complition, hence no outward supply arise, how can we take ITC.
Sir, Kindly help me in this regards. As per the tender process of the works, the contractor has purchase tender paper from this office, before GSt, they will give 5% vat on the papaer cost. NOw as per the GST rule what is the rate of the GSt on the cost of the tender paper.
what about reverse charge in work contract
We are a civil contractor engaged in road construction works awarded by PWD and Municipal Corpns. Our rates are inclusive of all taxes. How to calculate GST on works contract and what is the percentage of GST applicable on Works Contract. Can we take Input Tax Credit on purchases of raw materials and capital goods ? Pl. guide.
GST ACT SEC 17(5)(C) says…. input tax credit shall not be available in respect of works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service.
We are govt registered contractor, usually undertake construction work of roads,bridges, buildings, etc in process of construction we purchase material like Cement,Asphalt,Sreel etc..
Are we allowed credit of GST on purchased material?
Sir,
I have one business of FRP products manufacturing.and another is Hotel stainless steel and M.S kitchen equipment as well as MS and SS Tables and chairs for hotel industries.Kindly inform GST rates on the same.
Thanking You
Ashok Manwadkar
Mob-9370608922
Kindly clarify whether ITC can be availed where the works contract includes supply of material (Special Coatings) and labour charges for application thereof, at the clients manufacturing facility located in a different State. Also , whether seperate Registration is necessary in the State where the contract is executed.
sir plz clarify, i do fabrication work which include sale of gate,cendeliiars,railing and also do job work like cnc cutting work, what will be the tax impact on my business and whether i can opt for composition scheme or not
If Principal supply chasis for fabrication of bus body and contractor return back bus after fabrication. Will this contract will fall under works contract or composite supply ?
I am a government approved civil contractor executing works contract for original (capital) as well as maintenance works. What will be rate of GST is different for capital & maintenance work Also whether some part will be on part of receiver like in service tax?
we are a painting contractor, doing painting works with supply of paints, in that case what % of GST applicable
I want to know rate of deduction of Work contract tax under GST on payment like we deduct 6% WCT in Punjab under existing law.
Very Helpful.
Please clarify on GST on Supply,Erection and Civil Works carried on Different States for Power Projects like KPTCL,APGENCO etc,Supply is Separate Contract,Erection is Separate Contract and Civil Works are Separate Contract.Is registration required for each state where we awarded Contracts.Can We Bill from Registered Place of Business for Small amount of erection involved where Supply is more and Erection is small amount and erection is only Labour Works only.
in case of works cotratract building construction say of about 50lakhs under vat i was paying 4%of gross receipt as tax under composition .now it not available under gst what is the tax payable amt.amt of tax already paid on purchases ITC can be claimed.what about labour charges paid(35%).pls clarify
How to make invoice in work contracts and what tax applicable in work contract. Also pl advice me there will be two tax or single tax.
Please clarify, what would be impact of GST on running work contracts awarded by Railways in June to be completed in next six months, out of purview of ServiceTax, leviable to VAT under abatement scheme.
Thanks & best Regards.
will Commissioning and erection of Lifts and escalators will be covered under ‘Works Contract’, if answer is affirmative kindly let me know under which provision and how??
Thank You in advance
Input credit for work contracts – GST levied on purchased raw material like cement, steel, sand etc. for any civil work contract will be taken in input or not. Pl. clarify.
kindly guide:
1. If we transfer capital goods like machineries to one branch to another branch its require to issue invoice & e-way-bills ? and
2. can we claim ITC on Professional fee, rental charges etc. which is available on service tax ?
thank you
Ours is a MSME unit engaged in installation & repairs of communication equipment. Our office is in Hyderabad and we have registered under GSTN. We do not have any branches but our engineers go to different states to execute installation/repair works at the premises of our customers. Please clarify, if it is necessary to register with each of those states where we execute projects, even though we donot have any branch office in sthose states. Thank you.
Pls clarify- in the case of construction of machinery, where the said machinery is fabricated and supplied in parts to the customers end for final erection and commissioning at customers place, such supply will fall under sale of Goods or services under GST.?
Also clarify, whether registration ought to be taken by the supplier in its own state or it should be taken at the customers state too?
KINDLY CLARIFY –>WHETHER WORKS CONTRACT IS APPLICABLE FOR CIVIL CONSTRUCTION SECTOR ONLY OR FOR OTHER SERVICES TOO. PLEASE DETAILS THE SAME