Commercial civil work related

You're dealing with a classic and complex GST treatment situation involving commercial construction (civil) contracts. Let's break it down into parts to help clarify:

🔍 1. Nature of the Contract

From your descripttion:

• The contractor is supplying goods (materials) like cement, steel, electricals, etc.

• Also supplying services like labor, fabrication, electrification.

• Entire contract is for commercial construction.

• Invoice is raised with GST @ 18% as per SOR (Schedule of Rates).

📌 Conclusion:
This is a Works Contract as defined under Section 2(119) of the CGST Act:

Works Contract means a contract for building, construction, fabrication, completion, erection, installation, etc. of immovable property, involving the transfer of property in goods (whether as goods or in some other form).

So, it's not pure service, nor a mixed supply. It is a composite supply, with the principal supply being construction service, hence qualifies as a Works Contract.

✅ 2. GST Treatment & Rate

• GST rate on commercial works contracts is generally 18% (unless it involves government, affordable housing, etc.).

• So, the contractor charging 18% GST is correct.

🚫 3. ITC Eligibility – The Key Issue

This is where restrictions come into play.

🔴 As per Section 17(5)(c) & (d) of CGST Act:

ITC is not allowed for:

“Works contract services” when supplied for construction of an immovable property (other than plant and machinery), except when used for providing further supply of works contract services.

🧾 In Simple Terms:

🎯 Apply to Your Case

📌 Summary

✅ Recommendations

• Check the end use of the constructed property:

  • If for own use → no ITC

  • If for taxable renting/leasing → ITC may be allowed

• Contractor should maintain proper SOR, purchase invoices, and labour records for ITC claims.