BACKGROUND OF WORKS CONTRACT UNDER
GST
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.
Supply of Services
For GST law, works contract as defined above will be
treated as a supply of service, thereby putting a closure
to the deliberation on the methodology of segregating
the works contract between goods and services.
Input Tax Credit
Input tax credit shall not be available in respect of the
works contract services when supplied for construction
of immovable property,(other than plant and machinery),
except where it is an input service for further supply of
works contract service.
ie credit of GST paid on works contract services will be
allowed only if the output is also works contract services.
TDS Provisions under CGST Act
1. Applicable to suppliers notified by the Central
Government on recommendations of council.
2. One standard rate viz. 1%
3. Deductor-
(a) A department or establishment of the Central or
State Government, or
(b) Local authority, or
(c) Governmental agencies, or
(d) Such persons or category of persons as may be
notified, by the Central or a State
Government on the recommendations of the
Council.
4. One single certificate of deduction –cum-remittance
to be furnished by the Deductor within five days of
remittance.
5. Under VAT Law If certificate of deduction alone is
furnished by the Deductor, burden on the works
contractor to prove deduction of tax at source. No
such burden cast on the Deductee. More onus is on
the Deductor.
6. Refund provisions clear. Credit can also be claimed
from the amount reflected in the Electronic Cash
Ledger.
Person eligible for input tax credit
• Person providing works contract service and availing
abatement under notification no.26/2012 shall be
entitled to take credit of eligible duties and taxes on
inputs held in stock and inputs contained in semi
finished goods or finished goods held in stock on the
date on which this provision is made effective.
Applicability
Even if the construction contract or works contract is
entered into prior to the date of introduction of GST, the
contracts would be taxable under the GST Act.
Credit of VAT/Service Tax
Where tax was paid under both Value Added Tax Act
and under Finance Act, 1994, viz., Construction service,
works contract or supply of food/beverages, Tax shall be
leviable under CGST Act on the supplies effected after
the appointed day and the Value Added Tax or Service
Tax shall be admitted as credit to the taxable person.
Eg: Contract entered in March, 2017 for Rs.
2,00,00,000/-. Advance received till 30th June, 2017
amounts to Rs. 10,00,000/-. Value Added Tax of Rs.
80,000/- and Service Tax of Rs. 1,20,000/-have been
paid on the said advance. Assuming appointed day as
1st July, 2017 GST shall be levied on Rs. 2,00,00,000/-
as per Sec 13 of the CGST Act. The value added tax
and service tax paid shall be allowed as credit under the
existing law in the manner as may be prescribed.
