{"id":14752,"date":"2020-08-13T15:16:37","date_gmt":"2020-08-13T09:46:37","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=14752"},"modified":"2020-08-13T15:16:38","modified_gmt":"2020-08-13T09:46:38","slug":"comprehensive-guide-on-works-contract-under-gst","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/comprehensive-guide-on-works-contract-under-gst\/","title":{"rendered":"A Comprehensive guide on Works Contract under GST"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Under Goods and Services, Tax Law works contract has been constrained to any work undertaken for Fixed and Immovable property. As per Section 6(a) of Schedule II of the CGST Act, works agreement shall be treated as \u201cSupply.\u201d Therefore, there is a clear differentiation of GST on works contract as a supply of service. In this article, we will discuss GST on the works contract in detail.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/comprehensive-guide-on-works-contract-under-gst\/#What_do_you_mean_by_Works_Contract\" >What do you mean by Works Contract?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/comprehensive-guide-on-works-contract-under-gst\/#Works_Contract_under_Services_Tax_and_VAT\" >Works Contract under Services Tax and VAT<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/comprehensive-guide-on-works-contract-under-gst\/#Input_Tax_Credit_for_Works_Contract_under_GST\" >Input Tax Credit for Works Contract under GST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/comprehensive-guide-on-works-contract-under-gst\/#Maintenance_of_Records_for_Works_Contract_under_GST\" >Maintenance of Records for Works Contract under GST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/comprehensive-guide-on-works-contract-under-gst\/#Time_Limit_to_issue_Tax_Invoice\" >Time Limit to issue Tax Invoice<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/comprehensive-guide-on-works-contract-under-gst\/#Time_of_Supply\" >Time of Supply<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/comprehensive-guide-on-works-contract-under-gst\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_do_you_mean_by_Works_Contract\"><\/span>What do you mean by Works Contract?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>According\nto section 2(119) of CGST Act \u201cwork contract\u201d states that a contract for construction,\nbuilding, production, completion, erection, installation, fitting out,\nimprovement, alteration, repair, maintenance, renovation, alteration or\ncommissioning of any immovable property where transfer of ownership in goods or\nservices (whether as goods or in some other form) is elaborated in the implementation\nof such contracts.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Works_Contract_under_Services_Tax_and_VAT\"><\/span>Works Contract under Services Tax and VAT<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Works contract has elements of both necessities of services and sale of goods. Hereafter, the same was taxable under both VAT as well as service tax.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"565\" height=\"330\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/08\/image-52.png\" alt=\"Services Tax and VAT\" class=\"wp-image-14753\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/08\/image-52.png 565w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/08\/image-52-300x175.png 300w\" sizes=\"(max-width: 565px) 100vw, 565px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Service\nTax<\/h3>\n\n\n\n<p>As per Section 65B of the Finance Act defines Works contract as a contract where transfer of property in goods and executing such agreement in the execution of such under GST for sale of goods are involved. The arbitration should apply for the purpose of carrying out building, erection, commissioning, installation of any movable or immovable property or for any other similar activity or a part thereof concerning such property.<\/p>\n\n\n\n<p>As per section 66E of the <strong><em>Finance Act<\/em><\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Finance_Act_(India)\"><strong><em>[1]<\/em><\/strong><\/a><\/sup><strong><em>,<\/em><\/strong> the services involved in the implementation of works contract shall apply as service. Henceforth service tax applies only to the service element of the works contract. The principle of apartheid of the value of goods was provided in <em><strong>Rule 2A Of theService Tax (Determination Of Value) Rules, 2006<\/strong><\/em>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">VAT<\/h3>\n\n\n\n<p>The dominant intention of the agreement is the implementation of a service. There is no component of sale of goods (as per Sale of Goods Act). The contract applies as permanent, no changes to levy VAT on the sale of goods involved in the implementation of works contract. The decision controlled by the government to modify the constitution on India and inserted Article 366 (29A)(b) which allowed the state government to levy a tax (VAT) on the transfer of property in goods involved in the implementation of a works contract.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/apply-for-gst-registration-certificate-online\/\">How to apply for GST registration certificate online?<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Input_Tax_Credit_for_Works_Contract_under_GST\"><\/span>Input Tax Credit for Works Contract under GST<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>According to section 17(5) (c) of the CGST Act, the input tax credit for works contract amenity when provided for construction of any immovable property other than plant and machinery excluding any input service for further supply of works contract service under GST. Therefore, any input tax credit for works contract can be availed by the person who is in the same business line and is using such services received for further supply of works contract service.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Maintenance_of_Records_for_Works_Contract_under_GST\"><\/span>Maintenance of Records for Works Contract under GST<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>According\nto Rule 56 (14) of the CGST Rules, each and every registered person implementing\nthe works contract should have separate accounts for works contract showing the\nfollowing details:<\/p>\n\n\n\n<ul><li>The names and address of the person on whose behalf the works contract are implemented;<\/li><li>Explanation, value, and quantity of goods or services received for the execution of works contract;<\/li><li>Description, value and quantity of products or services utilized in the implementation of works contract;<\/li><li>The details related to payment received in respect of every Works contract;<\/li><li>The name and address of supplier from where the received goods or services;<\/li><li>Place of Supply underworks Contract under GST.<\/li><li>Place of Supply under Works Contracts under GST should involve immovable property. According to Section 12(3) of the IGST Act, the area for the supply of the supplier and the addressee should be located in India only. The place of supply should act as the location of the immovable property.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Valuation\nof Works Contract under GST<\/h3>\n\n\n\n<p>Valuation\nof works contract service depends upon the contract which includes the transfer\nof property at location specified as a part of the works contract. In case of the\nsupply of service and valuation of works contracts under GST, involving the transfer\nof ownership in the area or undivided share of the domain, the value shall be:\n&#8211;<\/p>\n\n\n\n<ul><li>Value Of Supply Of Service as well as Goods = Total Amount Charged For Such Supply (-) Value Of The Share Of Land Or Undivided Stock Of Land<\/li><li>The total amount will include consideration charged for the above service, including the amount charged for the transfer of land.<\/li><li>The value of the land should be deemed to be one-third of the total amount charged for such supply of goods and services.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Place\nof Supply under GST<\/h3>\n\n\n\n<p>Works contracts under GST are connected and associated with immovable property. Where the supplier and recipient both are situated in India, the place of supply should be the location of immovable property situated. In case if the immovable property is situated outside India and supplier or recipient of the goods and services are located in India, place of supply would be the location of the recipient of goods and services. Where either the supplier or receiver is located outside India, place of supply should always be the location of immovable property situated in India. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Time_Limit_to_issue_Tax_Invoice\"><\/span>Time Limit to issue Tax Invoice<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Works contract under GST should be treated as \u2018continuous supply of services\u2019 as the services are provided under a contract with periodic payment responsibilities. In most of the cases, the period for payment exceeds three months.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"686\" height=\"218\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/08\/image-53.png\" alt=\"issue Tax Invoice\" class=\"wp-image-14763\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/08\/image-53.png 686w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/08\/image-53-300x95.png 300w\" sizes=\"(max-width: 686px) 100vw, 686px\" \/><\/figure><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Time_of_Supply\"><\/span>Time of Supply<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>No separate provision has been given\nfor the time of supply for works contract, which is treated as \u2018continuous\nsupply of services. Time of supply for \u2018continuous supply of services\u2019 shall be\ndetermined as per general provision given to determine the time of supply of\nservice which will be earlier of: &#8211;<\/p>\n\n\n\n<ul><li>Date when the invoice is issued\nor required to be issued<\/li><li>Period of receipt of payment <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Tax Law under works contract has been constrained to any work undertaken for Fixed and Immovable property. As per Section 6(a) of Schedule II of the CGST Act, works agreement shall be treated as \u201cSupply.\u201d Therefore, there is a clear differentiation of GST on works contract as a supply of service. In this article, we will discuss GST on the works contract in detail. Our <a href=\"https:\/\/corpbiz.io\/\"><strong>CorpBiz<\/strong><\/a> group shall be at your disposal if you seek expert advice on any aspect related with <a href=\"https:\/\/corpbiz.io\/gst-registration\"><strong>GST Registration<\/strong><\/a> along with complete compliance. We will help you ensure full compliance concerning all the requirements based on your anticipated activities, ensuring the productive and well-timed completion of your expectation.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/government-unable-to-pay-states-gst-compensation-share\/\">Latest: Government unable to pay state\u2019s GST compensation share<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Under Goods and Services, Tax Law works contract has been constrained to any work undertaken for Fixed and Immovable property. As per Section 6(a) of Schedule II of the CGST Act, works agreement shall be treated as \u201cSupply.\u201d Therefore, there is a clear differentiation of GST on works contract as a supply of service. In [&hellip;]<\/p>\n","protected":false},"author":18,"featured_media":14755,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[16],"tags":[872],"acf":{"service_id":"334"},"authorName":"Sakshi Srivastava","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/IMG-20180130-WA0007.jpg","authorDescription":"Sakshi has pursued B.B.A.LL.B.(IPR Hons.). She is an avid reader and is keen to gather and share her knowledge on the subjects relating to IPR, Company Law and GST. Priorly she has worked as a legal researcher and vide her articles she aims at improving the core knowledge of the subjects to the masses.","postViews":9882,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/14752"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=14752"}],"version-history":[{"count":7,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/14752\/revisions"}],"predecessor-version":[{"id":14766,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/14752\/revisions\/14766"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/14755"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=14752"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=14752"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=14752"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}