Hi Experts,
Contractor doing govt work (electrical dept) while giving contract amount to contractor govt will deduct some amount as Retention amount.
ex :-
Total Work value = 100(value)+ 18(tax) = 118
Govt payment = 60(value) + 18(tax) - 40(retention)= 78 (net payment)
**NOTE :- Gst TDS done for whole amount I.e 100.
In this scenario which amount we should take as turnover for the month?
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GST ON RETENTION MONEY DEDUCTED BY GOVT WORK
Replies (1)
| GST on retention money is a frequently debated issue. Here is the settled position: 1. Time of Supply for Retention Money: Under Section 12(2) of CGST Act, time of supply for services is the earlier of: date of invoice, date of payment, or date of completion of service. Retention money, though not yet paid, may still trigger GST liability. 2. CBIC Clarification (Circular 137/07/2020): CBIC clarified that if the retention money is held back pending satisfactory completion of contract and the final invoice is not raised on the retention portion, GST is payable on it only when it becomes due (i.e., when the conditions for release are satisfied and the invoice is raised or it should have been raised). 3. Practical Treatment: - If your invoice covers the full contract value (including retention portion): GST is payable on the full invoice value even though the retention is not yet received in cash. You can reflect the retention as outstanding receivable in books. - If you raise invoices progressively excluding the retention: GST is payable only on the amount invoiced. Raise a separate invoice for retention when it is released. 4. Recommended Approach: Raise invoices for the work done excluding the retention percentage. Issue a separate GST invoice for retention money only when the government department certifies and releases it. This avoids blocking GST funds unnecessarily. 5. TDS under GST: Government departments deduct TDS under Section 51 of CGST Act @ 2% on the payment made — but TDS is on amount paid, not on retention held. |
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