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Works contract

Varsha Agarwal (article) (35 Points)

02 May 2018

Whether following contracts in respect of new building are ‘works contract’ in terms of section 2(119) of CGST Act? a) Plumbing contract b) Electrical fitting c) Supply and fixing of doors d) Supply and installation of Lift / elevator e) Supply and Installation of fire- fighting equipments f) Supply and installation of gas pipelines

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5 Replies

CA Shivam Arora (Chartered Accountant) (2414 Points)
Replied 02 May 2018

Section 2(119) says “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.

Thus, any work on immovable property where there is transfer of goods + labour charges is works contract.

So, all are supply of service under works contract.

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Pankaj Rawat (GST Practitioner) (55047 Points)
Replied 02 May 2018

Yes fall under work contract

Varsha Agarwal (article) (35 Points)
Replied 02 May 2018

In most of above cases, material is taxed at 28%. If one takes the view that contract is works contract in such case even material is being taxed at 18%. In order to avoid any probable dispute, whether one split / bifurcate above contracts into separate contracts for supply of goods and supply of services?

CA Shivam Arora (Chartered Accountant) (2414 Points)
Replied 02 May 2018

Breaking a composite supply into supply of 2 or more different goods or services or both does not seem to be the intention of law. If that was possible then everyone will bifurcate the works contract into separate contract of goods and services and will take the ITC thereon since a person except a supplier of works contract services is debarred from taking ITC on works contract services.

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