How GST on Govt works shall be calculated. Building works has items eg. Steel, Cement, bricks, sand, garvel etc besides labour and each item has different GST tax rate. Contractor to whom govt has awarded work procures these individual items after paying GST tax. Works contract treat it as single service and rate is fixed at 12%. It means that 12% again shall be levied on all items combined including labour. Of course input credit is available but it shall be available to contractor to whom work is awarded. there aren't mechanisms by which he will refund to Govt the input credit he has got. How can estimates of particular work be prepared. It works fine for Builder who procures material himself and levies 12% WCT to customer under works contract and then gets ITCredit and paases benefit to customer. But how will Govt contracts be executed . How tax under works contract will be levied. Please Reply
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Gst works contract clarification
Contractor wil get ITC but how will he pass on benefit to Government who has alloted work to that contractor. Doesnt it means that Govt has to pay GST on materials besides work contract tax also. Pls help
The tax component is absorbed by the rates quoted by contractor. There is no question of benefit to contrcaor. Earlier he has to pay taxes from pocket and no ITC , Now the liability is raised on contracor with ITC. So its neutral for the contrcator. Earler DVAT or state taxex on contrcator were 2 to 5 percent depending on state. Now they are 18 % on gross amount. There is no extra benefit to contractor as you are thinking.
And yes. Someone has to pay taxes at the end of chain. A flat buyer or consumer or department who is the end link has to bear the costs. Because you are consuming it.
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