GST rate on works contract
In 25 GST council meeting held on 18 January 2018, it has been recommended by GST Council to reduce GST rate on works contract services (WCS) provided by sub-contractor to the main contractor providing Works Contract Services to Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity from which attracts the GST rate of 12%.
Currently, works contract under GST is charged to tax in three slab rates i.e. 5%, 12% and 18%. Initially, the GST rate on works contract service was notified at 18%. Subsequently, various notifications were issued notifying the various GST rates for different situations in which works contract service is being provided. As recommended by GST council on 18 January 2018, if sub-contractor is providing works contract services to main contractor and that main contractor is providing works contract services to Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity to 12% from 18%, provided the works contract service being provided by the main contractor is being chargeable at the rate of 12%.
Similarly, if the works contract under GST attracts the rate of 5%, then GST rate on such works contract service shall be 5% for subcontractor also.
Works contract here means the works contract as defined in Section 2(119) of the Central Goods and Services Act,2017.
(119) “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 execution of such contract;
Works contract has been said to be composite supply and further treated as a supply of service in Schedule III.