Work contracts in GST
This insightful article is penned by Ronak Khandelwal who is a Chartered Accountant and a B.Com Graduate and can be reached at Email:-Ronakkhandelwal135@gmail.com.
WHAT IS WORKS CONTRACT? ➼ works contract is essentially a contract of service which may also involve supply of goods in the execution of the contract. ➼ It is basically a composite supply of both services and goods, with the service element being dominant in the contract between parties. ➼ Under GST law The Works Contracts has been defined in Section 2(119) of the CGST Act, 2017 as “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.”
Rates of GST
Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer [GST rate 9% CGST & 9% SGST] Supply to the Government, a local authority or a Governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of [GST rate 6% CGST & 6% SGST] (a) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the
Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958); (b) canal, dam or other irrigation works; (c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal
Supply by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of – [GST rate 6% CGST & 6% SGST]
(a) a road, bridge, tunnel, or terminal for road transportation for use by general public;
(b) a civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana;
(c) a civil structure or any other original works pertaining to the “In-situ rehabilitation of existing slum dwellers using land as a resource through private participation” under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana, only for existing slum dwellers;
(d) a civil structure or any other original works pertaining to the “Beneficiary led individual house construction / enhancement” under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana;
(e) a pollution control or effluent treatment plant, except located as a part of a factory; or
(f) a structure meant for funeral, burial or cremation of deceased Supplied by way of construction, erection, commissioning, or installation of original works pertaining to- [GST rate 6% CGST & 6% SGST]
(a) railways, excluding monorail and metro; (b) a single residential unit otherwise than as a part of a residential complex; (c) low-cost houses up to a carpet area of 60 square metres per house in a housing project approved by competent authority empowered under the ‘Scheme of Affordable Housing in Partnership’ framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India;
(d) low cost houses up to a carpet area of 60 square metres per house in a housing project approved by the competent authority under- (1) the “Affordable Housing in Partnership” component of the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana;
(2) any housing scheme of a State Government;
(e) post-harvest storage infrastructure for agricultural produce including a cold storage for such purposes; or (f) mechanized food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages Services provided to the Central Government, State Government, Union Territory, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –
(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;
(b) a structure meant predominantly for use as
(i) an educational,
(ii) a clinical, or
(iii) an art or cultural establishment; or
(c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule III of the Central Goods and Services Tax Act, 2017. Construction services other than above [GST rate 9% CGST & 9% SGST]
Valuation of a works contract service ➼ Valuation of a works contract service is dependent upon whether the contract includes transfer of property in land as a part of the works contract. ➼ in case of supply of service, involving transfer of property in land or undivided share of land Particulars Amount Total amount charged for such supply ****** Less:- value of land or undivided share of land*** ****** Value on GST Payable ****** *** Value of land or undivided share of land in such supply shall be deemed to be one third of the total amount charged for such supply.
Place of Supply in respect of Works Contract:-
➼ place of supply would be governed by Section 12(3) of the IGST Act, 2017 ➼ where both the supplier and recipient are located in India. The place of supply would be where the immovable property is located. ➼ In case the immovable property is located outside India, and the supplier as well as recipient both are located in India. The place of supply would be the location of recipient ➼ As per Section 13(4) of the IGST Act, 2017 ➼ Where either the Supplier or the Recipient are located outside India The place of supply shall be the place where the immovable property is located or intended to be located.
Others Points:-
➼ As per Para 6 (a) of Schedule II to the CGST Act, 2017, works contracts as defined in section 2(119) of the CGST Act, 2017 shall be treated as a supply of services.
➼ As per section 17(5) (c) of the CGST Act, 2017, input tax credit shall not be available in respect of the 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.
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