RATE OF GST FOR SUB CONTRACT OF GOVERNMENT CONTRACT ALLOTED TO CONTRACTOR

[KERAGODEGOPALARAO ANANTHARAO]

A contract work of the government is allotted to a contractor, for which the rate of GST is 12%. The contractor has subcontracted the work to the subcontractor.

What is the rate of tax for contract work done by the sub-contractor whether 18% or 12%?

[KASTURI SETHI]

Service by sub-contractor to contractor is not supply of service to Govt. Sub-contractor will pay GST @18%. Contractor can take ITC. So it is revenue neutral.However, in the case of construction of affordable apartments, GST Rate is 12%.See FAQs issued vide circular no.354/32/2019-TRU dated 7.5.19.

You may study circulars and notifications issued during last two months, if there is any change.

[KASTURI SETHI]

Also read Notification No.1/18-CT(R) dated 25.1.18 amending notification No.11/17-CT (R) dated 28.6.17. Serial No.3(ix) refers. This amended notification allows concessional rate of 12% to sub-contractor with conditions.

[Shilpi Jain]

There are only certain works in respect of which the concessional rate is made applicable to the sub contractor as well.

Refer rate entry S. No. 3(ix) and 3(x).

[Shilpi Jain]

Also if you are referring to govt. works, i hope it is works for CG, SG and not relating to Govt. entity or Govt. authority. For services provided to these, the rate of tax is amended from 1.1.2022

[KALLESHAMURTHY MURTHY K.N.]

As per Notification No. 20/2017-Central Tax (Rate) New Delhi, the 22nd August 2017 in Entry Sl. No. 3 (iv)(a), an amendment to the main Notification No. 11/2017 is that "a road, bridge, tunnel, or terminal for road transportation for use by the general public"; referred to the works contract assigned by the Government. There is no specific mention either for only Government Works irrespective of local bodies or entities. Therefore, for the works procured from the governments, concerned with sub-contractor, the rate of tax is 6%+ 6% as per Notfn. No. 1/2018-Central Tax (Rate) New Delhi, the 25th January, 20181. As per my understanding, the effective date is the date of Notification. Prior to this, the rate of tax is 9%+9%.

For more clarity, refer to AAR of Maharashtra in the case of M/s Core Construction (Yatin Manoj Mora) No. GST-ARA- 08/2020-21/ B dated 10-12-2021 - 2021 (12) TMI 609 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA wherein it is discussed in detail about the provisions.

AI Summary

GST on subcontracting: subcontractor supplies attract the standard tax rate; reduced rates apply only for specified works where notified.
Subcontractor services to a contractor under a government works contract are generally taxable at the standard GST rate as supplies to the contractor, with the contractor able to claim input tax credit; concessional rates apply only for specified works where notifications/amendments explicitly extend the reduced rate to subcontractors, subject to conditions and effective dates, and must be confirmed by relevant circulars, notifications, or advance rulings.