建設請負契約にかかるGST

A works contract means a contract that involves both supplies of goods and supply of services such as a construction contract wherein the material is supplied along with service. Other examples of works contract service on completion, erection, installation, fitting, renovation, etc. 

In the pre-GST regime, works contracts have always been a matter of litigation since service tax was payable on service components to the Central Government and VAT was payable to the material government to the state government. The dispute was always about the value of services and goods in the contract.

However, GST has put an end to most of such issues and made taxes on works contracts more simplified. In this article, a detailed discussion is carried on the applicability of GST on works contracts.

1. What is a work contract

• The Works Contract has been defined in Section 2(119) of the CGST Act, 2017  as “works contract” means a contract for building, construction, fabrication, erection, completion, construction, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property involving the transfer of property in goods; (whether in the form of goods or in any other form) involved in the performance of such contract."
• In the pre-GST regime, works contracts could be carried out with respect to both movable property and immovable property.
• However, under the GST regime, works contracts are restricted to contracts for immovable property only.
• Therefore, Any contract for the supply of both goods and services with respect to movable property, such as painting a workshop, will not qualify as a works contract. Such supply will be taxed as composite supply under GST.

2.  Whether a work contract is a supply of goods or a supply of service

• Schedule II of the CGST Act, 2017 contains a list of activities that are either classified as the supply of goods or the supply of services.
• As per entry No. 6(a) of Schedule II of CGST Act, 2017, the works contract as defined in clause (119) of section 2 shall be considered as a supply of service.
• Further, as per Entry No. 5(b) of Schedule II of CGST Act, 2017, construction of a complex, building, civil structure or a part thereof, except where the entire consideration is received after issuance of the completion certificate, shall be considered as supply of service.
• Therefore, works contract shall be considered as a supply of service.

3. Input Tax Credit of works contract

• Section 17 of CGST Act specifies situations where proportionate ITC is available or where ITC is ineligible.
• As per Section 17 (5)(c) of CGST Act, the Input tax credit will not be available on works contract services when supplied for the construction of an immovable property (other than plant and machinery).
• However, ITC shall be allowed if such input service is used for further supply of works contract service.
• Therefore, in cases where construction service is obtained by a builder from a sub-contractor then such builder is entitled to take ITC of works contract service as such service is used for further supply of works contract service.
• However, if a company takes the services of a builder for the construction of his office premises then even if such premises is used for further supply of goods and services, the company is not entitled to take ITC of works contract service.
• Expression “Construction” includes re-construction, renovation, additions or alterations, or repairs, to the extent of capitalization, to the said immovable property.
• Further, ITC can be claimed with respect to the construction of plants and machinery.
• the expression “plant and machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes-
  • the land, building, or any other civil structures;
  • telecommunication towers; and
  • pipelines laid outside the factory premises.

4. Working model for works contract under GST

5. Place of Supply of Works Contracts

• Place of supply plays a vital role under GST as it determines the nature of the transaction, i.e., inter-state supply liable to IGST or intra-state supply liable to CGST & SGST.
• Place of supply provisions are divided into 2 parts one is where both supplier and recipient are located in India and second where either supplier or recipient is located outside India.

• Where both supplier and recipient are located in India:
  • Section 12(3) of the IGST Act deals with a place of supply for services related to immovable property.
  • As per Section 12(3) of the IGST Act, for any services provided for carrying out construction work directly related to immovable property such as construction work, the place of supply shall be the location of immovable property.
  • Therefore, If the contractor is located in Delhi and the Factory building is getting constructed in Uttar Pradesh then the place of supply for construction service will be Uttar Pradesh and such transaction will qualify as inter-state supply and will be liable to IGST.
  • Further, If immovable property is located outside India and both the supplier and the recipient are located in India, then the place of supply shall be the location of the recipient.

• Where either of supplier or recipient are located in India
  • As per Section 13(4) of the IGST Act, 2017, When either Supplier or Recipient is located outside India, for services related to immovable property, the place of supply will be the place where the immovable property is located or planned to be located.

6. Valuation of works contract under GST

• Provisions related to valuation are given under Section 15 of the CGST Act, 2017.
• As per common principle, the value of a supply of goods or services shall be the transaction value, which is the price actually paid or payable for such supply where the supplier and the recipient are not related and the price is the sole consideration for the supply.
• However, in the case of a works contract, valuation depends on whether consideration includes the value of the land transferred.
• Supply of Goods and materials under a construction contract is chargeable to GST. However, the supply of land is outside the GST ambit. Therefore, if consideration involves the value of land same should be excluded for computing GST.
• As per Notification 11/2017 dated 28th June 2017, In case the supply of construction service involves the transfer of property in land or an undivided portion of land, the value of the service and goods for computing GST shall be equal to the full amount charged for the supply less the value of the land/undivided portion of the land.
• Value of such transfer of land or undivided share of land, as the case may be, in such supply shall be deemed to be one-third of the total amount charged for such supply.
• Explanation. – For the above purpose, “total amount” means the sum total of,-

1. Consideration charged for aforesaid service; and
2. The amount charged for transfer of land or undivided share of land, as the case may be

• Example

Consideration received: INR 60,00,000

Value of Land: INR 20,00,000 (1/3rd of Total amount charged)

課税標準額：4,000,000インドルピー

7. 建設請負サービス提供者が保持すべき会計帳簿

• 2017年CGST規則第56条(14)に基づき、建設請負契約を履行するすべての登録事業者は、建設請負に関する個別の会計帳簿を作成し、以下の事項を記載しなければなりません。

1. 建設請負契約の委託者の氏名および住所
2. 建設請負契約の履行のために受領した物品またはサービスの名称、価額、および数量（該当する場合）
3. 建設請負契約の履行に使用した物品またはサービスの名称、価額、および数量（該当する場合）
4. 各建設請負契約に関して受領した支払いの詳細
5. 物品またはサービスを調達した供給者の氏名および住所

8. GSTにおける建設請負サービスの控除または免税

• GST導入前の制度では、建設請負サービスの対価に対し、サービス部分については中央政府へサービス税を、物品部分については州政府へ付加価値税（VAT）を納付する必要がありました。
• 対価には物品とサービスの両方の価値が含まれるため、両法の下では、他方の価値を減額するために一定の控除が認められていました。例えばサービス税では、建設工事において物品供給分として60％、修理・保守工事において30％の標準控除が適用されていました。
• しかしGSTでは、供給全体がサービス供給とみなされるため、法律上、暫定的な免税措置は設けられていません。
• ただし、対価に土地の価値が含まれる場合は、土地分として3分の1の控除が認められます。

9. 建設請負業者に対する簡易課税制度（コンポジション・スキーム）の適用

• 以前、簡易課税制度はサービス提供者には適用されず、物品供給者のみが利用可能でした。しかし、2019年4月より、売上高が500万ルピー以下のサービス提供者にも簡易課税制度の適用が拡大されました。