In an electrical contract company supply goods and service both how gst is calculated?

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X ltd of karnataka take a contract of electrical line erections in mp . The company supply his goods such as wire, transformer, local purchase pole and supply service by installing them. So how gst is calculated?
Replies (5)

It will be taxed as works contract, under IGST.

Section 2(119) of CGST Act defines works contract as "“Works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract."(emphasis supplied)

Further, under Section 17(5) of the Act, no input tax credit shall be available in respect of works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service.

You will therefore have to check whether:

(a) the installation is of any immovable property and the contract qualifies to be a works contract. If so, you have to further assess as to whether it is an input service for further supply of works contract service.  If these conditions are satisfied, then you can charge GST in your bills and claim input credit for all your input goods and services.

(b) If the contract does not qualify to be a works contract (i.e., it is not in relation to an immovable property), or if is not an input service for further supply of works contract service; then you can not claim input credit.

Dear Sir

(b) If the contract does not qualify to be a works contract (i.e., it is not in relation to an immovable property), or if is not an input service for further supply of works contract service; then you can not claim input credit.

As referrred by you in the above para, if a works contract doesnot qualify to be a works contract of a immoveable property, then such electrical contract will be termed as composite supply and taxed based on the principal supply. Input credits of goods and services involved in the composite supply will available against the tax charged for the composite supply.

Is the above treatment is correct? 

If It is composite supply then what will be principal supply , cable, transformer attracting rate of 28% or Labour will be principal supply attracting 18%. Since there are many goods like transformer, cable, switches, panels etc, it will be very difficult to identify which marterial qualifies for principal supply and Labour , skilled labour, specialised for executing contract seems to be principal supply. Your comments please.

If electrical contractor can claim itc on purchase?


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