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Building construction works

761 views 2 replies

unnikrishnan P

Tax Practitioner

228 Points Joined March 2012

Dear friends...

one of our client is engaged in construction of residential houses for which an agreement is executed to perform construction at a specific rate per sqft for both material and labour. He purchases materials in his on name and also does labour to complete the work. what will be the GST applicability and the rate and on which amount he should calculate GST?

Replies (2)

Rama chary Rachakonda

Master in Accounts & high court Advocate

9434 Points Joined December 2011

For your client engaged in construction of residential houses, GST applicability would be as follows: -

GST rate: 18% (12% CGST + 6% SGST/UTGST) for construction services - GST calculation: On the total contract value, inclusive of material and labor costs

However, there are some exceptions and additional considerations: -

If the client is providing construction services to a registered person (e.g., a builder or developer), the GST rate would be 18%. -

If the client is providing construction services to an unregistered person (e.g., individual homebuyer), the GST rate would be 12% (6% CGST + 6% SGST/UTGST). -

If the client is supplying materials (goods) as part of the construction service, GST would apply to the material cost at the applicable rate (e.g., 28% for cement, 18% for steel). -

The client can avail input tax credit (ITC) on the GST paid on materials (goods) purchased. -

The client should calculate GST on the total contract value, inclusive of material and labor costs, at the applicable rate.

Additionally, your client may need to consider: -

Reverse Charge Mechanism (RCM): If the client is receiving construction services from an unregistered person (e.g., labor contractor), they may need to pay GST under RCM. -

Composition Scheme: If the client's annual turnover is up to ₹2 crores, they may opt for the composition scheme and pay GST at a lower rate (e.g., 6%).

Rama chary Rachakonda

Master in Accounts & high court Advocate

9434 Points Joined December 2011

For your client engaged in construction of residential houses, GST applicability would be as follows: -

GST rate: 18% (12% CGST + 6% SGST/UTGST) for construction services - GST calculation: On the total contract value, inclusive of material and labor costs

However, there are some exceptions and additional considerations: -

If the client is providing construction services to a registered person (e.g., a builder or developer), the GST rate would be 18%. -

If the client is providing construction services to an unregistered person (e.g., individual homebuyer), the GST rate would be 12% (6% CGST + 6% SGST/UTGST). -

If the client is supplying materials (goods) as part of the construction service, GST would apply to the material cost at the applicable rate (e.g., 28% for cement, 18% for steel). -

The client can avail input tax credit (ITC) on the GST paid on materials (goods) purchased. -

The client should calculate GST on the total contract value, inclusive of material and labor costs, at the applicable rate.

Additionally, your client may need to consider: -

Reverse Charge Mechanism (RCM): If the client is receiving construction services from an unregistered person (e.g., labor contractor), they may need to pay GST under RCM. -

Composition Scheme: If the client's annual turnover is up to ₹2 crores, they may opt for the composition scheme and pay GST at a lower rate (e.g., 6%).

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