APPLICABILITY OF GST WHEN TDS AND RETENSION MONEY IS DEDUCTED FROM ADVANCE

[Mehul Pandya]

DEAR EXPERTS,

ONE CONTRACTOR IS ENTERED INTO CONSTRUCTION AGREEMENT. AS PER AGREEMENT CUSTOMER WILL GIVE 10,00,000/- (TEN LAKHS) AS AN ADVANCE. BUT HE WILL DEDUCT FOLLOWING ITEMS AS PER AGREEMENT.

a. 3% - 30,000/- FOR SECURITY DEPOSIT

b.10% - 100,000/- AS A RETENSION MONEY

c. 2% - 20,000/- FOR TDS

AFTER ABOVE DEDUCTION CUSTOMER CREDITED 8,50,000/- IN CONTRACTORS BANK ACCOUNT.

MY QUERY IS WHICH AMOUNT WILL BE CONSIDERED FOR DISCHARGING GST LIABILITY ON ADVANCE RECEIPT ?

AI Summary

GST Liability on Construction Contracts: TDS, Retention, and Security Deposits are Taxable Advances Under Section 2(31) CGST Act. A contractor entered a construction agreement where the customer provides an advance of 10,00,000 INR, deducting amounts for security deposit, retention money, and TDS, resulting in 8,50,000 INR credited to the contractor. The query concerns which amount should be considered for GST liability. The response clarifies that GST must be paid on TDS, and both retention money and security deposit are considered taxable advances. These deductions are not considered payment for supply until the supply is made, as per Section 2(31) of the CGST Act.