Billing in case of sub contract operations

Sir,

A Sub-contactor registered in Karnataka is engaged by a contractor registrered in Delhi for works contract in Karnataka and asked the sub-contractor to issue IGST invoices to Main Contractor in Delhi since he is not having any registered place in karnataka.

But some professional are saying that this purely a intra state supply and the sub-contractor has to charge SGST & CGST. 

Since the sub-contractor is no way connected to the main customer and getting payment from main contractor directly how can he charge SGST/CGST instead of IGST.

Please help...

Thanks & regards,

 

Gopalakrishna.

Replies (4)
Quick Summary
This discussion clarifies GST billing for subcontractors. When a contractor registered in Delhi engages a subcontractor in Karnataka for works contract within Karnataka, the place of supply is Karnataka. Therefore, the subcontractor, being registered in Karnataka, must issue invoices with SGST and CGST, as it's an intra-state supply. Charging IGST would be incorrect unless the contractor has a specific registered presence in Karnataka for this work.

What is the nature of supply the subcontractor provide?

It is repairs /civil works sir.

Works Contract: PoS is the location where the immovable property is situated or intended to be situated (Section 12(3) of IGST Act).
 
Since the works contract is in Karnataka, the place of supply is Karnataka.
The sub-contractor, being registered in Karnataka, should issue invoices with CGST and SGST (intrastate supply).
Issuing IGST invoices (interstate supply) is incorrect, as the supply is within Karnataka.

This is a classic debate! The correct approach depends on the specific circumstances. However, generally speaking:

- If the sub-contractor is registered in Karnataka and the works contract is executed in Karnataka, it is considered an intra-state supply. - 

As per GST laws, intra-state supplies attract SGST and CGST. - Since the sub-contractor is not registered in Delhi (where the main contractor is registered), they cannot charge IGST.

 In this scenario, the sub-contractor should charge SGST and CGST to the main contractor, as the supply is within the same state (Karnataka).

However, if the main contractor has a registered office or a branch in Karnataka, and the sub-contractor is providing services to that office/branch, then IGST might be applicable. 

It's essential to consult a GST expert or chartered accountant to analyze the specific situation and ensure compliance with GST regulations.

Additionally,

 refer to the GST Act, Section 12(3), and the Place of Supply of Goods and Services Regulations for further clarification.

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