This article covers complete information about works contract along with works contract hsn code and gst rate. In works contract services, total three types of Works Contract GST rates on works contract services. That is 18% GST, 12% GST and 5% GST. Let me clear here, hsn code will be always 9954 for works contract services. Actually for services word service accounting code (SAC) is used. In many cases works contract GST rate is 18%, GST on government works contracts for certain works and works of non commercial nature GST Rates are 12%. In one or two case only GST rate is 5%. It was practically very difficult some time to decide whether particular works contract falls in 18% GST rate or 12% GST rate. This was a great grey area in GST for huge litigations in future. Therefore in 47th meeting of GST council, government had taken decisions to keep GST rates only 18% in almost majority types of works contract and therefore now, government has issued GST Notification to increase GST rates in works contract service.
Works contract GST rate notification
There is notification 11/2017 Central Tax (Rate) for GST rates of various services. In this notification Sr No 3 gives list of works contract GST rates. Now this sr no 3 of Notification 11/2017 Central Tax (Rate) has been amended by a new GST notification 03/2022 Central Tax (Rate) dated 13.07.2022 for increasing GST rates in works contract service. This amendment comes into force from 18.07.2022. Therefore all this new GST rates are applicable w.e.f 18.07.2022
What is works contract in GST?
Before we go through the recent changes in works contract gst rates, first lets understand, what is meaning of works contract in GST?
As per Section 2(119) of CGST Act, 2017
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;
New GST Rates on works contract services into effect from 18.07.2022.
HSN code (SAC) is 9954 un all cases for works contract.
| Sr No | Description of service | Old Rate | New Rate |
| 1 | Works contract service provided to person referred in Note-3 (Nature of works contact service –See Note-1) -Historical Monument -Archaeological site -Archaeological excavation -Antiquity -Canal -Dam -Other irrigation works -Pipeline -Conduit -Plant | 12% | 18% |
| 2 | Works contract service provided to person referred in Note-3 (Nature of works contact service See Note-1) -Road -Bridge -Tunnel -Terminal for road transport -Civil structure or any other original work (See Note-4) -Pollution control plant -Effluent treatment plant -Funeral, burial, cremation of deceased -Building (See Note-5) | 12% | 18% |
| 3 | Works contract service provided to any person (Nature of works contact service See Note-2) -Railway -Monorail, -Metro -Single residential unit otherwise than as a part of a residential complex – Low-cost houses of 60 sq meters per house in a housing project (see note-6) -Post-harvest storage infrastructure for agriculture produce -Cold storage for agriculture produces -Mechanized food grain handling system Machinery -Equipment | 12% | 18% |
| 4 | Works contract service provided to person referred in Note-3 (Nature of works contact service -see Note-1) – Non-commercial original work (means other than commerce, industry or any other business) -Educational establishment -Clinical establishment -Art or cultural establishment Residential complex Gov. self-use, -Gov. quarters or for specified persons | 12% | 18% |
| 5 | Works contract service provided by sub-contractor to Main contractor for -Historical Monument -Archaeological site -Archaeological excavation -Antiquity – Canal -Dam -Other irrigation works -Pipeline -Conduit -Plant -Non commercial original work (means other than commerce, industry or any other business) -Educational/clinical/art/cultural establishment – Residential complex–Gov. self-use, Gov. quarters or for specified persons | 12% | 18% |
| 6 | Works contract service to person referred in Note-3 for predominantly earth work (means 75% or more earth work) | 5% | 12% |
| 7 | Works contract service by sub-contractor to main contractor for predominantly earth work (means 75% or more earth work) | 5% | 12% |
Note-1
Works contract service by way of contract service construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of all above mentioned work of above work
Note-2
Works contract service by way of construction, erection, commissioning, or installation of original works
Note-3
Works contract service provided to Central Government, State Government, Union Territory, Local Authority.
Note-4
A building owned by an entity registered under section 12AA or 12AB of IT Act 1961 for centralized cooking or distribution, for mid-day meals under the mid-day meal scheme sponsored by the Central Government, State Government, Union Territory, Local Authority.
Note-4
Civil Structure or any other original work pertaining to scheme under
- Jawaharlal Nehru National Urban Renewal Mission
- Rajiv Awaas Yojana
Civil Structure or any other original work pertaining to scheme under
- Housing for All (Urban) Mission
- Pradhan Mantri Awas Yojana (Urban)
Work
- “ln-situ redevelopment of existing slums
- Beneficiary led individual house construction / enhancement
- “Economically Weaker Section (EWS)
- Under Afford. Housing part.by SG, UT, LA, UDA
- Under Credit Linked Scheme
- Lower Income Group, Middle Income Group-1, Middle Income Group-2 under Credit Linked Scheme
Note-5
A building owned by an entity registered under section 12AA or 12AB of IT Act 1961 for centralized cooking or distribution, for mid-day meals under the mid-day meal scheme sponsored by the Central Government, State Government, Union Territory, Local Authority.
Note-6
Low-cost houses of 60 sq meters per house in a housing project
- approved under the ‘Scheme of Affordable Housing in Partnership’ framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India;
- approved under
- the “Affordable Housing in Partnership” component of the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana; or
- any housing scheme of a State Government;
- which has been given infrastructure status vide notification of Government of India, in Ministry of Finance, Department of Economic Affairs vide F. No. 13/6/2009-INF, dated the 30th March,2017
Impact of changes in GST to big civil contractors and infrastructure contractors
This sudden change in GST from 12% to 18% may impact to many ongoing big contracts. Many contracts of railway, road, bridge etc have already been entered upon by contractors with service recipient. In majority cases service recipient are government, normally in government contract, there is no escalation clause to compensate increase in GST rate. Price per measurement remains steady even after changes in works contract gst rates. That means this increase in GST rate is to be born by contractors not by service recipient (government). Now size of these government contracts are generally with crores of rupees. Means this will resulls in huge loss in crores to big contractors.
Recommendation to honorable government
I personally recommend to honorable government to give instructions to works contract service recipient, particularly to various government department to compensate to contractors the amount extra GST due to increase in GST rates.
FAQs
What is the GST rate for Works contract?
From 18/07/2022, GST rates is 18% in al most majority of works contract services. Only for Works contract service to Works contract service provided to Central Government, State Government, Union Territory, Local Authority for person
for predominantly earth work is 12% w.e.f. 18.07.2022. (note that such earth works was subject to only 5% GST before 18.07.2022)
What is HSN code for works contract under GST?
9954 is HSN for works contract service in GST
Can works contractor claim ITC?
Yes, works contractor can claim all ITC except ITC blocked under Section 17(5) of CGST Act, 2017. Remember works contractor can claim ITC on construction of immovable property also if works contractor is going to sale this immovable property.
What is the GST rate for government works contracts 2023?
Before 01/01/2022 GST rates for works contract services provided to Central Government, State Government, Union Territory, Local Authority, Government Entity were 12%
From 01/01/2022 benefit of concessional rate of 12% for works contract services provided to Government entity and Local authority was removed. Means 18% GST was applicable for works contract services provided to Government Entity and Governmental Authority. However benefit of concessional rate of 12% GST was continued for works contract services provided to
Central Government, State Government and Union Territory.
But now from 18.07.2022, concessional rate benefit of 12% GST even removed for works contract services provided to Central Government, State Government and Union Territory also. In other words we can say that from 18.07.2022 GST rate on works contract service is 18% even if its provided to Government.
What is the meaning of works contract?
As per Section 2(119) of CGST Act, 2017
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;
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Suppose, if work is complete on 20/02/2022, but payment is still not paid till 18/07/2022, in this context kindly clarify whether to charged 18% or 12 % GST while paying to contractor??.
Hi Ravindra.
In your case if bill also raised before 18/07/2022, then old GST rate 12% will be applicable even if payment is received after 18/07/2022.
This is governed by Section 14 of CGST Act 2017.
Is the bill means GST invoice or bill raised by department for payment to government
In work contract service, first of all RA Bill (Running bill) is prepared, based on work completion approved by contractee (government if work is for government). And then tax invoice will have to be issued by contractor based on that RA bill. This Tax Invoice is GST Invoice
If bill and payment both are issued on or after 18/07/2022 then 18% GST rate will be applicable in your case. But if either bill or payment is before 18.07.2022, then GST rate 12 % will be applicable as work already completed before 18.07.2022 Refer Section 14 of CGST Act 2017
Agriculture university mey Gravel road bananay mey gst
Percent kitna laygaygaa
18%
Can we produce fly ash bricks at site for use in work under work contract sac 9954
if you supply fly as along with your labour work for immovable property. , then only it can fall in works contract. only supply of fly ash would be supply of only material even you supply for immovable property construction.
Please refer definition of works contract given in Section 2 of CGST Act 2017