Registration of GST for Work Contracts in India
Definition of “works contract”:
Under Section 2 (119) of the GST Act, 2017 “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 registration of GST for work contracts in India
Any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both.
- Non-Governmental Works contract services – GST rate applicable is 18% .
- Governmental Works contract services – GST rate applicable is 12 %
Requirements for Registration of GST for Work Contracts in India
- If the aggregate turnover of the supplier exceeds Rs. 20 Lakhs and if the supplier does not fall under the special category state, every supplier shall be liable to be registered in the State or Union territory from they make a taxable supply of good or services or both.
- For special category states, if the taxable supply exceeds Rs. 10 Lakhs he is liable to be registered in that state.
For the purposes of obtaining registration, it is important to identify the ‘origin’ of supply even though GST registration is a ‘destination’ based tax. Tax goes to the State where the service is supplied (destination) but registration is required in the State from where the supply was originated. In case a “works contract” service, which is immovable in nature, the place of supply is where the immovable property is located. Place of Supply (as determined from IGST Act) provides the ‘destination’ and this is not relevant for registration. The location of Supplier is relevant for registration.
Under GST laws, “Works Contract” has been restricted to any composite supply made for an “Immovable Property” unlike the erstwhile VAT and Service Tax regime where composite supply for movable properties were also treated as “works contract”.