Fabrication can be classified under work contracts
This query is : Resolved
22 September 2012
Dear sir/Madam
Kindly clarify
whether fabrication is classifed under work contract
we are supplying steel to the contractor at free of cost and the contractor fabricates by using electrodes and gases which has been supplied by him. In this case whether it can be treated as work contracts or labour contract .
Kindly clarify
whether fabrication is classifed under work contract
we are supplying steel to the contractor at free of cost and the contractor fabricates by using electrodes and gases which has been supplied by him. In this case whether it can be treated as work contracts or labour contract .
23 September 2012
Fabrication is classified under Works Contract,
The Amended definition of Works Contract is as follows:
Works Contract means a contract wherein transfer of Property in Goods involved in the Execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction erection, commissioning, installation,completion , fitting out, repair,renovation, alteration of movable or immovable property for carrying out any other similar activity or part thereof in relation to such property.
The Amended definition of Works Contract is as follows:
Works Contract means a contract wherein transfer of Property in Goods involved in the Execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction erection, commissioning, installation,completion , fitting out, repair,renovation, alteration of movable or immovable property for carrying out any other similar activity or part thereof in relation to such property.
18 November 2012
As per my opinion there is no transfer of property in my case as i am providing the steel to fabricator at free of cost , he is carrying out the job by using consumables at his cost hence it cannot be considered as works contract.
24 July 2024
In the context of the Goods and Services Tax (GST) regime in India, the classification of activities like fabrication involves understanding whether they fall under "works contract" or "labour contract." Here’s a clarification based on the information provided:
1. **Works Contract vs. Labour Contract**:
- **Works Contract**: A works contract typically involves the transfer of property in goods during the execution of a contract. It includes a combination of goods and services where both are supplied for a single price. The definition under GST includes contracts where goods are supplied along with services such as construction, fabrication, installation, etc.
- **Labour Contract**: A labour contract, on the other hand, involves services provided by one party (the contractor) to another (the recipient) where the main consideration is for the provision of services, not the transfer of goods.
2. **Your Situation**:
- You are supplying steel to a contractor at no cost, and the contractor is using the steel along with other consumables (electrodes, gases) to perform fabrication work.
- Since you are providing steel free of cost and there is no transfer of property in the goods (steel) to the fabricator, it suggests that the transaction does not qualify as a works contract under GST.
- Instead, it aligns more closely with a labour contract where the contractor is providing a service (fabrication) using their own consumables (electrodes, gases) and the steel provided by you.
3. **GST Implications**:
- For works contracts, GST is applicable based on the composite supply of goods and services.
- For labour contracts, GST is applicable on the service provided by the contractor, which includes fabrication in this case.
4. **Conclusion**:
- Based on your description, where there is no transfer of property in the steel and the contractor uses their own consumables, the transaction would typically be classified as a labour contract for GST purposes.
- It’s advisable to consult with a tax expert or GST consultant to confirm the classification based on the specific details of your arrangement and to ensure compliance with GST regulations.
This distinction is crucial for determining the correct GST treatment and ensuring that the appropriate taxes are applied based on the nature of the contract (works contract vs. labour contract).
1. **Works Contract vs. Labour Contract**:
- **Works Contract**: A works contract typically involves the transfer of property in goods during the execution of a contract. It includes a combination of goods and services where both are supplied for a single price. The definition under GST includes contracts where goods are supplied along with services such as construction, fabrication, installation, etc.
- **Labour Contract**: A labour contract, on the other hand, involves services provided by one party (the contractor) to another (the recipient) where the main consideration is for the provision of services, not the transfer of goods.
2. **Your Situation**:
- You are supplying steel to a contractor at no cost, and the contractor is using the steel along with other consumables (electrodes, gases) to perform fabrication work.
- Since you are providing steel free of cost and there is no transfer of property in the goods (steel) to the fabricator, it suggests that the transaction does not qualify as a works contract under GST.
- Instead, it aligns more closely with a labour contract where the contractor is providing a service (fabrication) using their own consumables (electrodes, gases) and the steel provided by you.
3. **GST Implications**:
- For works contracts, GST is applicable based on the composite supply of goods and services.
- For labour contracts, GST is applicable on the service provided by the contractor, which includes fabrication in this case.
4. **Conclusion**:
- Based on your description, where there is no transfer of property in the steel and the contractor uses their own consumables, the transaction would typically be classified as a labour contract for GST purposes.
- It’s advisable to consult with a tax expert or GST consultant to confirm the classification based on the specific details of your arrangement and to ensure compliance with GST regulations.
This distinction is crucial for determining the correct GST treatment and ensuring that the appropriate taxes are applied based on the nature of the contract (works contract vs. labour contract).
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Is this income indian or foreign income?
- 15ca /15cb whose income tax login? remitter or nri seller's login?
- Regarding Documentation & Compliances for Opening of Unit of Pvt Ltd.
- TDS U/S. 194NF
- RCM applicability on Rent Paid by Registered Person to Unregistered Landlord for Residental Building
- ITC temporary reversal and reclaim
- GST on export of services and Input Credit
- Applicable TDS rate for sale of property in Nov 2024
- RCM INVOICING FROM NOV-2024
- Should I report my US salary for January, February, March in Schedule FA?
- LAST YEAR 2022-23 ITC IN NEXT YEAR 2023-24 REPORITNG IN GSTR-9
- MIS MATCH OF INVOICE NUMBER
- IGST Credit-Show cause notice issued-confusion
- Issue of gst e invoice
- How to adjusted advances given or receipt
- Foreign vendor without PAN unable to to register due to non receipt of OTP on foreign number ?
- 133(6) DIN INVALID format error - ->WHERE TO REPLY 133(6) notice?
- Query for dubts
- Regarding einvoice taken on nil rated sales
- Strategical investment in Public listed company
Trending Online Classes
CAclubindia
