Reduced rate of GST vide Notification 20/2017 on certain specific kind of Works Contract

[Anuj Bansal]

As you are aware that Governmentof India has released a Notification No. 20/2017-Central Tax (Rate) on 22^nd April 2017 making certain amendments in the previous notification No. 11/2017- Central Tax (Rate), dated the 28^thJune, 2017. In the said notification, rates have been reduced from 9% to 6% on certain specific kind of services which also includes certain kind of construction contracts specifically the services relating to construction of public utility, govt. projects, etc.Following are the construction services where the rate of tax has been reduced from 9% to 6% CGST:

Composite supply of works contract supplied to the Government

Composite supply of works contract supplied to the Government, a local authority or a Governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of–

a)  a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958;

b)  canal, dam or other irrigation works;

c)  pipeline, conduit or plant for water supply, water treatment, or sewerage treatment or disposal.

Composite supply of works contract (even to non-government bodied / persons)

Composite supply of works contract supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,-

(a)  a road, bridge, tunnel, or terminal for road transportation for use by general public;

(b)  a civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana;

(c)  a civil structure or any other original works pertaining to the “In-situ rehabilitation of existing slum dwellers using land as a resource through private participation” under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana, only for existing slum dwellers;

(d)   a civil structure or any other original works pertaining to the “Beneficiary led individual house construction / enhancement” under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana;

(e)    a pollution control or effluent treatment plant, except located as a part of a factory; or

(f)    a structure meant for funeral, burial or cremation of deceased.

Composite supply of works contract excluding completion, fitting out, repair, maintenance, renovation or alteration

Composite supply of works contract supplied by way of construction, erection, commissioning, or installation of original works pertaining to-

1.  Railways, excluding monorail and metro;

2.  A single residential unit otherwise than as a part of a residential complex;

3.  Low-cost houses up to a carpet area of 60 square metres per house in a housing project approved by competent authority empowered under the 'Scheme of Affordable Housing in Partnership' framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India;

4.  Low cost houses up to a carpet area of 60 square metres per house in a housing project approvedby the competent authority under-

         i.    the “Affordable Housing in Partnership” component of the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana;

         ii.   any housing scheme of a State Government;

5.  Post-harvest storage infrastructure for agricultural produce including a cold storage for such purposes; or

6.  Mechanised food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages.

It can be noticed that rate of GST on all such services relating to construction of public utilities like dam, canal, low cost housing and that of national importance like historical monuments and archeological sites, has been reduced.

The above has given a big relief to the contractors, as the government was not compensating the builders for additional tax burden due to their limited budgets whereas the builders were reanalyzing the tax impact and making representations for compensation on account of increase in GST. Moreover, the act of reducing rate is a positive step towards development of the infrastructure of the country.

The corresponding notification has been released in IGST and UTGST. Thus effective rate of GST on such services has been reduced from 18% to 12%. States are yet to release corresponding notification in their respective SGST.

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Anuj Bansal

V.P.Gupta & Co. (www.vpgco.com)

Discussions to this article

[SHIVKUMAR SHARMA]

Please read the Date 22nd August 2017 Instead of 22nd April 2017 of Notification No.20/2017-Central Tax(Rate)

[Anuj Bansal]

Apology for writing 22^nd Aug, 2017 as 22^nd April, 2017. Its a clerical mistake. Thanks Mr. Shiv Kumar for correcting.

[KASTURI SETHI]

Nice article Sir. It is a mirror.

[Arjun Gopalakrishna]

Will the benefit of reduced tax applicable to the subcontractor under GPA providing service to the Main contractor.