GST APPLICABILITY ON TRANSACTION WHETHER IT IS SUPERVISION CHARGES OR WORK CONTRACT

[VIPUL JAIN]

Respected Members,

My client is a government entity which undertakes the work of construction of immovable property on behalf of other government departments/authorities/board/entity etc (herein after referred as govt.).

While allocating the work to my client they mention the cost of construction and fixed percentage of supervision charges, my client then publish and issue the tender to sum other contractor , my client add its supervision charges on what ever the bill is raised by the tender allotee and issue a demand note to govt, for example:

Cost of construction: 100

Cost of Interior : 50

Total Cost : 150

Supervision charges (5% of total cost) : 7.5

My question is whether the invoice should be raised under work contract as 157.5 + GST or invoice should be raised under supervision charges as 7.5 + GST

Further i would like to add that 150 is the actual cost my client only adds its fixed percentage of supervision charges.

[Ganeshan Kalyani]

Your client is acting as a 'pure agent'. Invoice may be raised as 150 no GST, 7.5 with GST.

[Shilpi Jain]

If Your client's scope puts him responsible for the construction and his scope is construction, then even if he sub contracts it will be regarded that he is providing works contract service.

[Ravinesh Sinha]

Total consideration of Rs 100+50+7.50=157.50. GST is leviable on 157.50.

AI Summary

GST on supervision charges: applicability depends on whether supplier is a pure agent or provides works contract. Whether GST attaches to the supervision fee or to the aggregate contract price turns on the characterisation of the government client's role. If the client functions as a contractor responsible for execution of construction, the entire consideration-including supervision-is part of the works contract service and includible in taxable value. If the client acts as a pure agent merely recovering third party amounts, construction costs may be treated as pass through while the supervision charge is invoiced and taxed separately.