Specifically Exempted Construction Related Services in GST: Before we dive into the issues circling the construction industry, it is imperative to understand the basic difference between the possible transaction structures under the new taxation regime. This is because, construction is an industry wherein failure to effectively structure the tax clauses of the contracts may easily lead to the contractor paying more taxes than the margin that they make. The good news for the on-going contracts is that under the light of the GST switch-over, the parties to the contract can revisit their tax clauses and make best use of the legal machinery provided under the revised model GST law/ Now check more details for "Specifically Exempted Construction Related Services in GST Regime" from below.....
Specifically Exempted Construction Related Services in GST1. Pure Labour contract services of construction related to:
- Original Works of a single housing unit other than part of housing complex.
- Construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation of a civil structure or any other original works pertaining to the beneficiary led individual house construction/ enhancement under housing for all urban mission / pradhan mantri awas yojana.
Input Tax Credit (ITC) Disallowances:
- ITC is not allowed for works contract services for construction of immovable property.
- ITC is not allowed on supplies received for construction of an immovable property on own account.
- ITC is not allowed on supplies received for construction of an immovable property on own account for furtherance of business.
- ITC is not allowed on construction of telecommunication towers, pipeline laid outside the factory, buildings and other civil structures (excluding foundation and structural support on which ITC is allowed.)
- ITC is allowed if it is a works contract for immovable property being plant & machinery
- ITC is allowed where the works contract services supplied is an input service for further supply of works contract service.
- ITC is allowed on supplies received for construction of an immovable property on own account being Plant and machinery
Place of Supply in relation to work contract under GST
- Place of Supply helps to decide whether particular supply is inter-state supply or intra-state supply to levy IGST or CGST & SGST/UTGST respectively.
- Place of supply of service in relation to Immovable Property Section 9(4) of IGST Act deals with the place of provision of service in relation to works contract of construction of immovable property which provides:
- Place of provision of service in relation to immovable property will be the place of provision where the immovable property is situated which includes services of:
- Interior decorators
- Engineers and
- Other related experts or estate agents; for carrying out or co-ordination of construction work
- Where the immovable property is located in more than one State, the supply of service shall be treated as made in each of the States in proportion to the value for services separately collected or determined, in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other reasonable basis as may be prescribed in this behalf.
Place of supply in relation to other than Immovable Property.
- The location of the recipient where the address on record exists, and
- The location of the supplier of services in other cases.
Free suppliesPerhaps this is the most controversial amendment in the GST law. Section 15 (2) of the Model GST law deals with the calculation of “transaction value” for the purpose of GST levy. Clause (b) of section 15(2) specifically seeks to include any supplies provided directly or indirectly by the recipient of the supply free of charge or at a reduced cost for use in connection with the supply of goods/services.
GST on Long Term Construction or Works Contract (Section 186)If the contract (agreement registration date) is entered into prior to 1st July 2017 and if the supplies are made after 1st July 2017 then GST applies on such supplies of goods or services. However, if the supplies are also made prior to 1st July 2017 then the taxes would be payable as per the old law. In any case, if the contract is entered into after 1st July 2017, then GST will apply on such contracts.
GST on Periodic supply of goods or services (Section 187)
Duties and taxes on inputs or input services during transit (Section 171)
No tax is payable under GST when
- The goods are exempted under earlier law (Central Excise, VAT)
- Goods cleared prior to six months from appointed day (goods cleared from 01.01.2017 onwards)
- Goods are returned to Place of business within six months from appointed day (goods are returned on or before 31.12.2017)