Laying of roads inside the factory
This query is : Resolved
30 July 2013
Dear Sir,
Please clarify Laying of Road inside the premise of our factory is coming under which head?
The contractor is laying and repairing road.Pls clarify the doubts under two situations.
Sit:1 Material supplied by company and work done by contractor- clasification of service?
Sit:2 work done by contractor with material
pls clarify
regards
karthik
Please clarify Laying of Road inside the premise of our factory is coming under which head?
The contractor is laying and repairing road.Pls clarify the doubts under two situations.
Sit:1 Material supplied by company and work done by contractor- clasification of service?
Sit:2 work done by contractor with material
pls clarify
regards
karthik
08 August 2013
Mr Karthik,
All such works are covered under works contract. Do you want the query to be answered on behalf of service provider or receiver.
Also tell us the category of the provider and receiver like individual, firm or company etc., Because for this service both are liable.
All such works are covered under works contract. Do you want the query to be answered on behalf of service provider or receiver.
Also tell us the category of the provider and receiver like individual, firm or company etc., Because for this service both are liable.
12 August 2013
Dear Sir,
we are mfg co,
we are service receiver.
contractor is individual
we provide material, labour only used by contractor but not under manpower supply.
we are mfg co,
we are service receiver.
contractor is individual
we provide material, labour only used by contractor but not under manpower supply.
02 August 2024
In the context of laying and repairing roads within a factory premises, the classification of services and tax implications can be influenced by several factors, including the supply of materials and the nature of the work performed. Here’s a detailed explanation based on the two situations you’ve mentioned:
### **Situation 1: Material Supplied by Company and Work Done by Contractor**
**Classification of Service:**
1. **Service Classification:**
- Since the contractor is only providing services without supplying materials, the service is classified under **"Works Contract Service"**. In the GST regime, this is treated as a supply of service.
2. **GST Applicability:**
- Under GST, a works contract is a composite supply of goods and services. When the materials are provided by the service receiver (your company) and the contractor is only providing services, the contractor’s service is considered as a works contract service where the service portion is taxable.
3. **Tax Rate:**
- For works contract services where the service recipient provides the material, the GST rate typically applicable is 18% (9% CGST + 9% SGST/UTGST). However, it’s advisable to check the specific GST notifications applicable as rates might vary based on the nature of the contract.
4. **Input Tax Credit (ITC):**
- Since you are providing the material, you can claim ITC on the materials supplied, but you will need to pay GST on the service portion. Ensure that the contractor’s invoice reflects only the service portion.
### **Situation 2: Work Done by Contractor with Material**
**Classification of Service:**
1. **Service Classification:**
- When the contractor provides both the material and the service, this falls under the classification of **"Works Contract Service"** as well. Here, the contractor is providing a composite supply of goods and services.
2. **GST Applicability:**
- The entire works contract is subject to GST. The applicable GST rate for works contracts where the contractor provides both material and labor is generally 18% (9% CGST + 9% SGST/UTGST), as per current GST rates.
3. **Input Tax Credit (ITC):**
- You can claim ITC on the GST charged by the contractor for both the material and service portion of the works contract. The contractor will issue a GST invoice with the applicable GST rate.
### **General Points:**
- **Contractual Agreements:** Ensure that the terms of the contract clearly specify who is responsible for providing materials and labor. This will help in proper classification and compliance with GST requirements.
- **Invoice and Documentation:** Maintain proper documentation and invoices from the contractor, ensuring they detail the services provided and GST charged. This will facilitate the claim of ITC and compliance with tax laws.
- **Consult a Tax Professional:** For precise guidance, especially if there are any specific conditions or exceptions applicable to your case, it’s advisable to consult a tax professional or GST consultant.
### **Summary:**
- **Situation 1:** When you provide materials and the contractor provides only the service, it’s classified as a works contract service with GST on the service portion.
- **Situation 2:** When the contractor provides both materials and services, it’s a composite works contract, and GST is applicable on the entire contract value.
Ensure compliance with GST regulations by maintaining accurate records and consulting with a tax advisor for detailed guidance tailored to your specific circumstances.
### **Situation 1: Material Supplied by Company and Work Done by Contractor**
**Classification of Service:**
1. **Service Classification:**
- Since the contractor is only providing services without supplying materials, the service is classified under **"Works Contract Service"**. In the GST regime, this is treated as a supply of service.
2. **GST Applicability:**
- Under GST, a works contract is a composite supply of goods and services. When the materials are provided by the service receiver (your company) and the contractor is only providing services, the contractor’s service is considered as a works contract service where the service portion is taxable.
3. **Tax Rate:**
- For works contract services where the service recipient provides the material, the GST rate typically applicable is 18% (9% CGST + 9% SGST/UTGST). However, it’s advisable to check the specific GST notifications applicable as rates might vary based on the nature of the contract.
4. **Input Tax Credit (ITC):**
- Since you are providing the material, you can claim ITC on the materials supplied, but you will need to pay GST on the service portion. Ensure that the contractor’s invoice reflects only the service portion.
### **Situation 2: Work Done by Contractor with Material**
**Classification of Service:**
1. **Service Classification:**
- When the contractor provides both the material and the service, this falls under the classification of **"Works Contract Service"** as well. Here, the contractor is providing a composite supply of goods and services.
2. **GST Applicability:**
- The entire works contract is subject to GST. The applicable GST rate for works contracts where the contractor provides both material and labor is generally 18% (9% CGST + 9% SGST/UTGST), as per current GST rates.
3. **Input Tax Credit (ITC):**
- You can claim ITC on the GST charged by the contractor for both the material and service portion of the works contract. The contractor will issue a GST invoice with the applicable GST rate.
### **General Points:**
- **Contractual Agreements:** Ensure that the terms of the contract clearly specify who is responsible for providing materials and labor. This will help in proper classification and compliance with GST requirements.
- **Invoice and Documentation:** Maintain proper documentation and invoices from the contractor, ensuring they detail the services provided and GST charged. This will facilitate the claim of ITC and compliance with tax laws.
- **Consult a Tax Professional:** For precise guidance, especially if there are any specific conditions or exceptions applicable to your case, it’s advisable to consult a tax professional or GST consultant.
### **Summary:**
- **Situation 1:** When you provide materials and the contractor provides only the service, it’s classified as a works contract service with GST on the service portion.
- **Situation 2:** When the contractor provides both materials and services, it’s a composite works contract, and GST is applicable on the entire contract value.
Ensure compliance with GST regulations by maintaining accurate records and consulting with a tax advisor for detailed guidance tailored to your specific circumstances.
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