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GST on Works Contract services

CA Abhijeet Saturdekar (Practicing Chartered Accountant) (55 Points)

28 April 2022

Works Contractor "XYZ" registered only in Maharashtra has engaged a sub-contractor "ABC" registered only in Punjab to provide composite services pertaining to civil construction on an immovable property site of "PQR" in Punjab:

Need clarification w-r-t to the following:

1. Whether "ABC" (from Punjab) should charge IGST or CGST and SGST to "XYZ" in the Tax Invoice

2. If "ABC" should charge CGST and SGST in the Tax invoice raised to "XYZ", whether ITC of both CGST and SGST will be available for utilisation towards payment of IGST liability of XYZ (as levied in its bill to PQR).

Thanks & Regards

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9 Replies

sabyasachi mukherjee (25965 Points)
Replied 29 April 2022

It's IGST AND CGST

Rajendra Prasad (Employee Private) (1824 Points)
Replied 29 April 2022

1.) No, "ABC" cannot charge IGST as the place of supply of services to Immovable property in Punjab. Only he has to charge CGST + SGST.

2.) No., "XYZ" is not eligible to avail CGST + SGST ITC from "ABC" e / Tax Invoice if he is not registered in Punjab.

Pankaj Rawat (GST Practitioner) (55030 Points)
Replied 29 April 2022

ABC raise Bill to XYZ :
IGST will be Applicable . (As it is being sub-contracted by XYZ to ABC)
XYZ can claim ITC (IGST)

XYZ raise Bill to PQR :
As the Immovable property located in Punjab the POS will Punjab , hence XYZ will charge IGST in bill to PQR.

As per Section 49A R/w Rule 88A the ABC & XYZ can utilise ITC accordingly.

Rajendra Prasad (Employee Private) (1824 Points)
Replied 29 April 2022

Please be referred Section 13(4) of IGST Act. As per the said Section the place of supply of services supplied directly in relation to an immovable property, shall be the location of Immovable property.

As the place of supply is in Punjab "ABC" has to be billed on Punjab. Punjab to Punjab CGST + SGST only has to be charged.

And XYZ is not having registration in Punjab he is not eligible to avail input credit.

CA Abhijeet Saturdekar (Practicing Chartered Accountant) (55 Points)
Replied 29 April 2022

Dear Sir,

Thanks for your response. Will even the CGST component charged by ABC shall not be available for input credit to XYZ ?

CA Abhijeet Saturdekar (Practicing Chartered Accountant) (55 Points)
Replied 29 April 2022

Dear Sir,

Thanks for your response, but your view differs with the view given by Mr. Rajendra Prasad basis sec 13(4) of the IGST Act, which suggests that CGST + SGST needs to be charged by ABC. Sir can you please help with suitable reference clause supporting your view.

Pankaj Rawat (GST Practitioner) (55030 Points)
Replied 29 April 2022

Dear Abhijit

As per the your Query , the contract has been awarded to XYZ (Maharastra ) from PQR (Punjab) & XYZ (Contractor) has Sub-Contracted the same to ABC (sub-contractor -punjab).

Now the billing will be done as per below

XYZ (Mahrastra) will raise bill to PQR : As per the Sector 12(3) of IGST Act : POS related to Immovable property is where the property is situated , hence IGST is Applicable.

ABC (punjab) will raise bill to XYZ (Maharastra): As ABC is providing Service on Behalf of XYZ to PQR, hence will charge IGST bill raise to XYZ. (Bill To, Ship To Model)

Note : Dear Rajender , Section 13 of IGST determine POS in case of Import & Exports

CA Abhijeet Saturdekar (Practicing Chartered Accountant) (55 Points)
Replied 29 April 2022

Thank You Sir for the clarification

1 Like

Rajendra Prasad (Employee Private) (1824 Points)
Replied 30 April 2022

Ok, if it is Section 12 or 13 of IGST Act, the place of supply shall be the place of immovable property only. ABC Punjab is not raising invoice to PQR, he is raising invoice to XYZ. Hence the concept Bill to Ship to will not apply here.

ABC Punjab is providing supply to XYZ in related to the Immovable property, where it has been located in Punjab itself. Hence he can't deviate.

ABC situated in Punjab and place of supply is in Punjab he has to raise Invoice CGST and SGST itself and ABC is not eligible to avail input credit.