Govt Civil Contracts

[Tanmay Sharma]

Dear Readers Greetings,

What is the GST 'Taxable Amount' And 'Tax Amount' in the following case of Govt Civil Contractor?

Say, Gross Amount (also tendered amount) for a project = 1,00,000/- including all taxes complete, alloted to the contractor by a govt Deptt. say PWD. (TDS@2%=2000/-,Labour-cess@1%=1000/- and income tax@2%=2000/-) total of 5000/- is deducted from the above Gross Amount by the govt departmentand remaining 95000/- is paid to the contractor.

What is the tax amount?

[KASTURI SETHI]

No deduction is admissible on account of TDS, Labour cess, Income Tax from transaction value as per Section 15 of CGST Act.. Now suppose rate of GST is 18% and ₹ 1, 00,000/- is inclusive of tax and thus taxable value is ₹ 84746/- and tax amount is ₹ 15254/-. .

[KASTURI SETHI]

In simple words, the contractor is to pay GST on the amount of ₹ 5000/-.calculated by you on account of TDS,Labour Cess and Income Tax). The amount of ₹ 100000/- is cum-tax.

Formula is : 100 x 100000 divided by 118 =84746/-

[PAWAN KUMAR]

Labour cess is not indirect tax hence it is not leviable to gst. Other TDs will be charged @2% only, if TDs charged no other income tax will be leviable. As per my view taxable value should be 83898 and gst @18% should be 15102. For leviability of gst delhi high court order is available.

[Tanmay Sharma]

Thank you for the responses

The GST rate for govt civil construction is 12%.

The state sales tax department is asking to treat 100000 (i.e, gross amount) as taxable amount and pay 12000 as Tax amount, that is why i asked the query to get an expert opinion.

100000/- is the Tendered amount and it includes every thing cost of materials,labour,taxes all complete.

Response from anyone with the acurate knowledge (working with Govt. construction departments) will be highly appreciated, the rules for the civil construction returns are not fully explained in the SGST/CGST acts.

[KASTURI SETHI]

Also go through the replies against Issue ID No. 115480 dated 1.10.19.

[PAWAN KUMAR]

dear sir,

agreed GST rate is 12%

[KASTURI SETHI]

Dear Pawan Kumar Ji,

Cess is a kind of tax or duty. All taxes except Income Tax are indirect taxes. DGFT fee, Registration fee, Stamp duty are exceptions.

[PAWAN KUMAR]

Dear Sir,

In this regard, very old decision of Delhi High Court. Also empowered committee of State GST finance ministers have also represented this as not includible in indirect tax category, hence not subsumed in the list of act/legislations into GST Law.

[Lawyer Inc]

Civil law is a very important branch of law which protects the private rights of citizens and offers legal remedies to the aggrieved persons and provides reliefs which they sought in a dispute. It covers multiple areas of law like contracts, media, education, sports, property, torts, family law etc... This civil law tries to resolve disputes by providing compensations to the victims, rather than rigorous punishment to the accused. In the Civil Court, disputes related to civil matters can be settled with the help of judicious and refined attorneys and lawyers. Civil law is vast, and it covers many areas of law in day to day life. These are the categories of law which deal under Civil Law, or Civil suits can be filed in these matters.

[KASTURI SETHI]

How reply at serial no.9 dated 21.4.20 is related to the query ?

[PAWAN KUMAR]

Agreed sir. Not understand.

[KASTURI SETHI]

Dear Pawan Kumar Ji,

You have cleared the air. Thus we have arrived at conclusion.Thanks you very much.

[Navin Chaturvedi]

In our state, the government is also deducting royalty from the bill, despite us not been given any mining rights.

Is GST on royalty being deducted from civil contractors liable under RCM?

[KASTURI SETHI]

Royalty service is under RCM.

[Navin Chaturvedi]

Sure it is Sethi sir. But, my Question is:- ABC is a government contractor that makes roads/bridges with no mining rights/mine allocation, the PWD dept while processing their bill is deducting an amount as Royalty. Is GST under RCM applicable on such Royalty deductions?

AI Summary

Taxable value under GST: inclusive contract price treated as transaction value and GST computed after grossing down. Contract price tendered as a tax-inclusive lump sum is to be treated as the transaction value for GST; deductions such as TDS and income tax are not deductible from that transaction value when computing GST. The taxable value is extracted from the inclusive gross by grossing down for the applicable GST rate, and GST is computed on that extracted pre-tax value. Debates remain about whether labour cess and similar levies form part of the transaction value, and amounts identified as royalty may attract GST under the reverse charge mechanism.