Goods and Services Tax (GST) has been a hot topic of discussion in India ever since its implementation in 2017. GST is a single tax levied on the supply of goods and services. One of the most critical aspects of GST is its application on works contracts. In this article, we will discuss the GST rate on works contract 2021.
A works contract is a contract where a contractor agrees to do specific work, such as construction, installation, or repair, for a consideration. GST applies to works contracts as well. The rate of GST depends on the nature of the contract, and the work agreed upon by both parties.
As per the GST Council`s decision in its 43rd meeting held on 28th May 2021, the GST rate on works contracts has been revised. The new rates are as follows:
1. 12% GST rate on works contract for construction of single residential houses (other than low-cost houses) with the carpet area less than 60 square meters.
2. 18% GST rate on works contract for construction of single residential houses (other than low-cost houses) with the carpet area of 60 square meters or more.
3. 5% GST rate on works contract for construction of affordable housing (with a carpet area of up to 60 square meters).
4. 1% GST rate on works contracts for affordable housing projects (with a carpet area of up to 60 square meters) under the Credit-Linked Subsidy Scheme (CLSS).
5. 12% GST rate on works contract for renovation or repair of an existing residential property.
6. 18% GST rate on works contracts for construction of commercial or industrial buildings.
7. 12% GST rate on works contract for construction of infrastructure, including roads, bridges, airports, and railways.
It is essential to remember that GST is calculated on the value of the contract and not on the entire consideration. The value of the contract is the consideration received for the works contract, excluding the value of land, and other activities that do not constitute supply under GST.
In conclusion, the GST rate on works contracts has been revised, and it is crucial for contractors and consumers to be aware of the updated rates. It is advisable to consult with a tax expert to ensure compliance with GST regulations. By adhering to the regulations, contractors and consumers can avoid any legal issues and contribute to building a better India.