Construction of Bldg. work

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

08 March 2010 Dear all the member of CA club,

(1) Pls give me guidance regarding the construction of bldg. for the government, semi-government, nagarpalika, etc like residential quarters, office building, etc. are taxable or not.

(2) If there is registered with GETCO (GEB - electricity company under Government) contractor and construction of control room, office building, etc. and they have not any service tax no. and they not to claim any service tax againg the executed work. In those works, they have the tender clause, the service tax is paid by the contractor and after submission of proof of paid service tax reimbursement from the department.

But if they didnot paid to service tax department because they thoughts that that liabilities is to the department they didnot paid and claim from the department.

Pls. give the proper guidence in this regards

Thanks

With regards

Paras H. Kariya
Law student
Junagadh

Querist : Anonymous

Querist : Anonymous (Querist)

23 March 2010 Dear Freinds,

(1) Pls give me guidance regarding the construction of bldg. for the government, semi-government, nagarpalika, etc like residential quarters, office building, etc. are taxable or not.

(2) If there is registered with GETCO (GEB - electricity company under Government) contractor and construction of control room, office building, etc. and they have not any service tax no. and they not to claim any service tax againg the executed work. In those works, they have the tender clause, the service tax is paid by the contractor and after submission of proof of paid service tax reimbursement from the department.

But if they didnot paid to service tax department because they thoughts that that liabilities is to the department they didnot paid and claim from the department.

Pls. give the proper guidence in this regards

Thanks

With regards

Paras H. Kariya
Law student
Junagadh

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
Follow

20 July 2024 Certainly, let's address your queries regarding the taxation aspects of construction works for government entities and contractors registered with GETCO (GEB - Gujarat Electricity Board):

### 1. Taxability of Construction for Government Entities:

- **Residential Quarters, Office Buildings, etc.**: In general, construction services provided to government entities such as government departments, semi-government bodies, municipalities, etc., are subject to taxation. This typically includes GST (Goods and Services Tax) under the current regime in India.

- **Tax Liability**: As per GST laws, construction services are considered as services provided and are taxable unless specifically exempted or under a zero-rated category.

- **Exemption**: There are certain exemptions and concessional rates under GST for specific types of government contracts. For instance, services provided to certain government bodies or on specific projects may be exempted or subject to a reduced rate of GST.

- **Compliance**: Contractors involved in such projects need to register for GST if their aggregate turnover exceeds the threshold limit and comply with GST regulations, including invoicing, filing of returns, and payment of taxes.

### 2. Specific Scenario with GETCO Contractors:

- **Service Tax (Previous Regime) and GST (Current Regime)**: Under the previous service tax regime and the current GST regime, contractors providing construction services are liable to pay tax on the services rendered unless specific exemptions apply.

- **Contractual Clauses**: It’s common in contracts with government entities like GETCO for the contractor to pay service tax (or GST) and subsequently claim reimbursement from the department upon submission of proof of tax payment.

- **Non-payment of Tax by Contractor**: If the contractor has not paid the service tax (or GST) to the government treasury but instead has claimed reimbursement from GETCO based on the tender clause, this could lead to issues:

- **Tax Liability**: The contractor remains liable to pay the tax to the government even if reimbursement is delayed or not received from the department.
- **Compliance Issue**: Non-payment of tax to the government authorities could result in penalties, interest, and other consequences under tax laws.

### Guidance and Recommendations:

- **Tax Compliance**: Contractors should ensure they comply with all tax obligations promptly. This includes timely payment of GST to the government treasury, irrespective of any reimbursement clauses in contracts.

- **Documentation**: Maintain proper documentation of all tax payments, invoices, and correspondence with GETCO or other government departments to substantiate claims for reimbursement and ensure compliance during audits.

- **Professional Advice**: Given the complexities involved in government contracts and taxation, it’s advisable to consult with a tax advisor or a chartered accountant who specializes in GST and government contracts. They can provide tailored guidance based on specific contract terms and prevailing tax laws.

In summary, while construction services for government entities are generally taxable under GST, contractors must ensure compliance with tax laws, including timely payment of GST to the government treasury and proper documentation for reimbursement claims. Professional advice will be instrumental in navigating these requirements effectively.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now