Inclusion of Free issue material in Works contract value

[JSW CEMENTLIMITED]

Dear All Experts,

Kindly throw your valuable opinion on whether value of Free cost material should be included in works contract value for the purpose of charging GST

[Himansu Sekhar]

Please refer to Sec 15(20(b) of CGST act,2017. The value of free cost materials is includible in the WCS.

[KASTURI SETHI]

I agree with the view of Sh.Himansu Sekhar Ji. Section 15(2) (b) of CGST Act.

[Ganeshan Kalyani]

Yes , value of material issued free of cost to the contractor to incorporate it into the construction work to be added to consideration.

[Ganeshan Kalyani]

In service tax the Rule stated to include value of free material issued free of cost to the contractor to incorporate it into construction work. But the Act was not clear to state that it should form part of consideration. Hence there was so many issue. So many case in favour of assesses were passed. And equal number of cases were passed against the assesses.

[Ganeshan Kalyani]

In GST it is clearly given in the Act that the value of free issue material to be included in consideration to offer to tax.

[JSW CEMENTLIMITED]

Thanks for your opinion. I was also of the same opinion and wanted to have others opinion also. Thanks once again.

[AGRAWAL METAL]

Dear All

it will Depend upon the wording of the contract entered between the contractor and the contractee. If the wording says that every thing will be supplied by Contractor if that be the case then it will be added and taxable as supplies. But if the wording in contract is clear as to what the contractee will supply and what contractor will supply then the material; supplied by Contractee FOC for executing the contract will not be held part of consideration and gst will not be applicable.

AI Summary

Inclusion of free issue materials: treated as part of works contract consideration and taxable under GST. Free issue materials supplied by a contractee are generally treated as part of the consideration of a works contract and included in the taxable value under the CGST valuation provision; historically this addressed ambiguity under service tax. Inclusion may nevertheless turn on contract wording-if the contract clearly allocates supply of specified materials to the contractee free of cost, those materials may not constitute the contractor's consideration.