Works Contract under GST

Meaning of Works Contract

A contract for the delivery of commodities may be included in a works contract, which is technically a contract for the provision of services.

A “works contract” is, in its most fundamental form, a composite delivery of both products and services. In a broad sense, a works contract may pertain to either mobile or immovable property. Pro tip gstr 9 filing.

Classification of Work Contract Service

According to Schedule 2 of the CGST Act, work contract services are categorized as the provision of services rather than the sale of goods.

This is the case because of the nature of the transactions involved.

Even in situations where the services are given in conjunction with the sale of tangible goods, this is still the case.

This is still the case despite the fact that the services are tied in some way to the exchange of commodities.

This is due to the fact that the supply of services is the core element of labour contract services.

Because of this fact, the following explanations apply to why this is the case:

Rate of GST under work contract services:-

Contract for the composite supply of labour to the government or local authorities during construction, erection, installation, maintenance, and modification.

  1. Historical Monument
  2. Archaeological site
  3. Pipelines, sewage systems, and water treatment facilities

Place of supply in case of work contract:-

If both the supplier and the recipient find in India, then the location of the immovable property will use as the criterion for deciding where the place of supply locate;

This is because India considers an immovable property supply country.

The IGST Act has this provision in its 12(3) section, which you can look for. If, on the other hand, the immovable property in question locates anyplace other than in India,

Then the location of the recipient will use to establish the place of supply rather than the location of the immovable property itself.

The location of the immovable property will serve as the criterion for identifying where the place of supply is in the event that either the supplier or the receiver situates outside of India.

This is the way things suppose to do in order to comply with the requirements outlined in subsection 13(4) of the IGST Act.

Exemption under Work Contract

Labor services work contract that are performed solely for the purpose of building, erecting, commissioning, installing, renovating, or altering a single residential unit or a house construction that falls under the purview of the Pradhan Mantri Awas Yojana are exempt from the Goods and Service Tax Act.

Labour services conducted to build, erect, install, modify, or alter a residence under the Central Goods and Services Tax Act.

In the country of Canada, the Goods and Services Tax Act, which includes this exception, can find in Section 11 of the act.

ITC availability for Work Contract

Person in same firm who utilises such services for future works contract delivery can claim an input tax credit.

However, if a company receives a service of works contract from the main contractor, other than for plant and machinery,

The company will not be able to claim the Input Tax Credit of GST paid on the invoice issued by the works contractor. This is because the main contractor considered a works contractor.

Time Limit to issue Tax Invoice

Works contract service is a continuous supply of service, hence the following time limits should apply for tax invoices:

The contract’s payment due date is when the GST invoice must issue.

The date of the GST invoice must be prior to or at the same time that the supplier receives payment.

When payment is contingent on an event’s finish, the GST invoice must date on or before that date.

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