Introduction of Works Contract in CGST Act, 2017
Introduction of Works Contract in CGST Act, 2017
Table of Contents
Introduction of Works Contract in CGST Act, 2017
Overview of works contract
The works contract is a combination of service and transfer of goods, New building design, erection, plant and equipment installation, improvement, repair, restoration, reconstruction are included.
Before the CGST Act, 2017
In the previous law if any new product was created during the work contact, then such manufacture become a taxable event. The supply of goods becomes taxable under VAT and the supply of services becomes taxable under Service Tax, and central excise duty is imposed if a new commodity emerges after the execution of the work contract. So, from the viewpoint of the taxable individual, it can cause a lot of uncertainty.
The following supply of services will attract GST as per Schedule II
The construction of the building, complex, civil structure or a part thereof, including a complex building intended for sale to a buyer, wholly or partly. The contract for work often involves the movement of goods, either as goods or are in some form. Different composition schemes with different VAT rates were available. Including a 60 percent reduction in new works and a 30 percent reduction in maintenance contracts, the service tax was also dynamic. With a much easier equation, GST solves those things.
Input tax credit not available
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. goods or services received by a taxable person for construction of an immovable property on his own account, other than plant and machinery, even when used in the course or furtherance of business.
When manufacturing plants and machinery, an input tax credit is provided to both a contractor and a taxable person. But no ITC is allowed to a taxable person who constructs on his own account, even though it is for business usage.
Composition Scheme not available
Composition Scheme not available Since it is treated as a service under GST, the composition scheme for work contracts is not available to work contractors. The composition scheme is allowed only to suppliers of materials. This is going to be a big loss to the small sub-contractors who are unable to opt for the composition system. They will be required to file to increase their enforcement and expenses under the normal taxation system.
No Abatement
No Abatement has been imposing for works contract service under GST. As reported earlier, the previous regime saw a reduction of 60% for new works contracts and 30% for maintenance works. Provided that the operating tax rate is 15 percent, and the job contract GST rate is 18 percent.
Decentralized Registration
The general rules of registration under GST apply to the works contractor as well. Hence, if his aggregate annual turnover exceeds Rs 20 lakh (or Rs 10 lakh in special category states) then he will require GST registration.
GST Returns for Works Contractors
The following returns are applicable to works contractors:
Attention Please note:
• The monthly GSTR-1 and GSTR-3B returns will soon be replaced by simplified monthly GST returns within a couple of months.
• The due date is rapidly approaching for the GSTR-9 file. It is important to be fully prepared and have a credible resource at hand for filing returns to avoid undue difficulty in the filing.
How does IFCCL help?
The world-class cloud-based software of IFCCL will support you when it comes to filing any GST return. IFCCL ‘s powerful tax filing software is entirely capable of handling even the last day’s scramble to give you a seamless and simplified experience that makes the filing process a breeze to you.
IFCCL also offers everything you need to comply with the GST laws, from registration, filing, and reconciliation of returns to cancellation of registration in one place.
We hope you can recognize the GST regulations governing works contract taxes with this guide. For more articles on specific GST related topics, see our Knowledge feature.
Regards
India Financial Consultancy Corporation Pvt Ltd.(IFCCL)
www.caindelhiindia.com
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