10 September 2018
Hi, Let Say A is main Govt .contractor and he sub Contact B for that Govt Contract . Now in turn B Sub contract C only for Labour Work .
I know for A & B GST Rate is 12% but what rate applicable for C 12% or 18% its pure labour contract for C.
10 September 2018
12% GST applicable on such sub contractor.
Querist :
Anonymous
Querist :
Anonymous
(Querist)
11 September 2018
Hi sir thank you for your reply. but our CA is telling that C is not giving service to main contractor (A) he is suppling services to sub contractor( B) and also it not composite works contract its purely labour contract for C so GST rate would be 18% for C. Now i am in confusion.
27 July 2024
In the scenario you described, where C is subcontracting labor work to B, and B is subcontracting to A for a government contract, the GST rate applicable depends on various factors. Here’s a detailed explanation based on the GST rules:
### 1. **GST on Subcontracting for Labor Services**
#### **GST Rate for Subcontractor C (Providing Labor Services)**
**GST Rate for Labor Services:** - **Labor Contract Services:** If subcontractor C is providing purely labor services, the applicable GST rate is **18%**. This is because labor services provided in isolation, and not as part of a composite or mixed works contract, fall under the standard GST rate of 18%.
**Composite Works Contract:** - **Definition:** A composite works contract involves both supply of goods and services (such as construction or maintenance contracts), and it generally attracts a different GST rate (typically 12% under GST).
**Pure Labor Services:** - **Standard Rate:** Since C is providing only labor services and not a composite or mixed works contract, the applicable GST rate for C’s labor services is **18%**.
### 2. **GST Rate for B and A**
**For B (Subcontractor):** - **Works Contract:** If B is engaged in a works contract for A, which includes construction or composite work for a government contract, the rate applicable is typically **12%** under GST for works contracts. This rate applies if the services fall under the scope of a composite works contract.
**For A (Main Contractor):** - **Government Contract:** If A is the main contractor providing works for a government contract, the same **12%** GST rate on works contracts applies to A.
### 3. **Clarification Based on Subcontracting Chain**
- **Subcontractor C:** Provides purely labor services to B. The rate for these labor services is **18%** GST as they do not qualify as a composite works contract. - **Subcontractor B:** Provides composite works contract services to A. Hence, the rate is **12%** GST. - **Main Contractor A:** As the main contractor for a government contract, the applicable GST rate is **12%** for works contracts.
### 4. **Important Considerations**
- **Nature of Services:** Ensure the nature of services provided by C is strictly labor and not part of a composite contract. The distinction is crucial for applying the correct GST rate. - **Documentation:** Proper documentation should be maintained to ensure correct GST rates are applied and claimed. This includes agreements, invoices, and other relevant documents.
### Summary
- **GST Rate for C (Purely Labor):** **18%** GST. - **GST Rate for B (Composite Works Contract):** **12%** GST. - **GST Rate for A (Main Contractor for Government Contract):** **12%** GST.
Given the complexity of subcontracting and GST rates, and to ensure compliance with GST laws, consulting with a GST professional or tax advisor is advisable to confirm the correct rates and any specific nuances in your situation.