Decoding GST on Works Contract

Under GST Regime, works contract will be treated as service and tax would be charged accordingly (not as goods or part goods/part services). This treatment of works contract as service and not as supply of goods will bring in much needed clarification to the works contracts.

Composition Scheme is not Available.

Composition scheme is not available to works contractors as it is treated as service under GST. Composition scheme is only available to suppliers of goods. This will be a big blow to the small sub-contractors who cannot opt for composition scheme. They will be forced to register for normal taxation scheme increasing their compliance's and costs.

GST Rates?

Refer recent notification 20/2017-Central Tax (Rate) ,dt. 22-08-2017

ITC credit on Works Contract?

ITC credit in case of works contract is one of the things which is still not completely resolved under GST regime. As per section 17(5), the input tax credit on works contract services when supplied for construction of an immovable property (other than plant and machinery) is not available except where it is an input service for further supply of works contract service. In other words, the services availed by the works contractor from sub works contractor is allowed as input tax credit. However, it is easier said than done, because ITC rules on works contract is still not clear and department clarification is much needed in this regard.
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