Work Contract in GST

What is Works Contract ?

Section 2(119) of the CGST Act, 2017 defines Works Contract

“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 where in transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.”

Input Tax Credit For Work Contract

Section17(5)(c) of CGST Act states that Input tax credit shall not be available in 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,

In case where works contract is a sub-contractor, main contractor can claim the credit on tax paid on SUB CONTRACT i.e. input service for further supply of WCS
In case of works contract of plant and machinery, service receiver can claim credit on tax on that works contract of plant and machinery.
In other cases Input tax credit shall not be available for service receiver i.e. tax paid on works contract cannot be claimed by service receiver.

Schedule II of CGST Act - Activities to be treated as supply goods or supply of services

As per Para 6 (a) of Schedule II to the CGST Act, 2017, Works Contract as defined in section 2(119) of the CGST Act, 2017 shall be treated as a supply of services.

Thus, there is a clear demarcation of a works contract as a supply of service under GST.

Place of Supply in respect of Works Contract

Works Contract under GST would necessarily involve immovable property. In view of the same the 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 proviso to Section 12(3) of the IGST Act, 2017
As per Section 13(4) of the IGST Act, 2017, in cases 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

Position Maintenance of records

As per Rule 56 (14) of the CGST Rules, 2017, every registered person executing works contract shall keep separate accounts for works contract showing –

(a) the names and addresses of the persons on whose behalf the works contract is executed;

(b) description, value and quantity (wherever applicable) of goods or services received for the execution of works contract;

(c) description, value and quantity (wherever applicable) of goods or services utilized in the execution of works contract;

(d) the details of payment received in respect of each works contract; and (e) the names and addresses of suppliers from whom he received goods or services.

Rate of GST for Works Contract

The rate of GST for Works Contract service has been prescribed in Serial number 3 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.

Some of the services are defined by further Notification No. 20/2017-Central Tax (Rate) dated 22.08.2017 & Notification no.24/2017-Central Tax (Rate) dated 21.09.2017

Sl. No.	Description of Services	Rate (percent)
3	(i) 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 first occupation, whichever is earlier. (Provisions of paragraph 2 of this notification shall apply for valuation of this service)	9
	(ii) composite supply of works contract as defined in clause 119 of section 2 of Central Goods and Services Tax Act, 2017.	9
	(iii) construction services other than (i) and (ii) above.	9

Against the above sl. no 3- item (iii), (“Construction Services other than .. above”), below table gives the description of these services;as per the Notification No. 20/2017, dated 22.08.2017

Description of Services

Rate

(percent)

(iii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied 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,

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);
canal, dam or other irrigation works;
pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal

6 Description of Services

Rate

(percent)

(iii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied 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,

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);
canal, dam or other irrigation works;
pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal

6

(iv) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,

(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.

(v) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning, or installation of original works pertaining to,-

railways, excluding monorail and metro;
a single residential unit otherwise than as a part of a residential complex;
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;
low cost houses up to a carpet area of 60 square metres per house in a housing project approved by the competent authority under-

the “Affordable Housing in Partnership” component of the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana;
any housing scheme of a State Government;

(e) post-harvest storage infrastructure for agricultural produce including a cold storage for such purposes; or

(f) mechanised food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages.

The following descriptions of services are further added through the Notification no. 24/2017 dated 21.09.2017

Description of Services

Rate

(percent)

(vi)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 civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;
a structure meant predominantly for use as (i) an educational, (ii) a clinical, or(iii) an art or cultural establishment; or
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.

(vii) Construction services other than (i), (ii), (iii), (iv), (v) and (vi) above

The below exemptions are notified for the works Service contracts under Notification no. 12/2017-Central Tax (Rate), dated 28-06-2017

Description of Services

Rate

(percent)

Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.

NIL