Rule 80% - 20% under construction contract

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The 80/20 rule in construction contracts relates to GST applicability, particularly under Reverse Charge Mechanism (RCM). If a concessional GST rate (1% or 5%) is chosen, at least 80% of goods and services must be procured from registered suppliers. Failure to meet this threshold means the shortfall is subject to 18% GST under RCM, payable by the next June.

Gautam Jaiswal

Gautam Jaiswal (Querist)

08 March 2021 What is 80% - 20% Rule under construction contract for gst applicability ?

CA Altamush Zafar

CA Altamush Zafar (Expert)

08 March 2021 Are you talking about RCM?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

09 March 2021 Where it is opted for concessional rate of GST 1% / 5%, the 80% of the procurement of goods and service* should be from the registered supplier.
In the event, the above procurement* is less than 80% in a financial year, the GST at the rate of 18% shall be paid on shortfall under RCM. Such liability shall be added to the output liability of any month not later than June of the subsequent year.

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