GST Rate on Sub Contractor

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A contractor performing subcontract work for canal and dam construction for a government project initially paid 12% GST. They are seeking clarification on whether this rate is correct or if they should be paying 18% GST. Based on Notification 11/2017-Central Tax (rate) and an AAR ruling, services provided by a subcontractor for irrigation works fall under the 12% GST slab rate, aligning with the main contractor's rate.

R Hiremath

R Hiremath (Querist)
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28 October 2024 Sir,
I have one doubt Main Contractor has provided Canal & Dam Construction work for Government in FY 2021-22 and for the same he charged 12% GST. I have Provided Sub Contract work to him. For that work I have Paid GST 12%. Is it Correct or Should I need to Pay 18% GST. Kindly help in this...

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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28 October 2024 As per Sl no 3, clause (ix) of Notification 11/2017-Central Tax (rate) dt 28.06.2017 as amended upto 25.01.2018, works contract service provided by a sub-contractor to the main contractor providing services in relation to construction of canal, dam or other irrigation works etc comes under slab rate of 12%.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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28 October 2024 "I observe that the purpose or object of the GST Council is to extend benefit to the last chain of said supply and reason for the same is to provide equal opportunities and equal level playing fields to business entities and avoid discrimination. Thus I am of the view that the recommendations made by the GST Council in this regard makes it clear that if GST rate on the work contract is 12% or 5% then sub-contractor is also liable to discharge his GST liability @ 12% or 5% as the case may be."
Extract from :: AAR Ruling, Uttarakhand NHPC Ltd , Ruling no 17/2018-19, Dated Jan 30,2019,

R Hiremath

R Hiremath (Querist)
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28 October 2024 Thank you for your valuable feedback sir...

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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28 October 2024 You are welcome..

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