{"id":4420,"date":"2018-11-24T15:40:28","date_gmt":"2018-11-24T10:10:28","guid":{"rendered":"https:\/\/taxclick.org\/?p=4420"},"modified":"2018-11-24T15:47:11","modified_gmt":"2018-11-24T10:17:11","slug":"gst-builders-developers","status":"publish","type":"post","link":"https:\/\/taxclick.org\/type\/gst\/gst-builders-developers\/","title":{"rendered":"GST for Builders and Developers"},"content":{"rendered":"

Introduction<\/strong><\/span><\/h2>\n

Works Contract Service is a specie of construction service. This activity has special relevance as it has been a very litigation prone issue. Earlier, after introduction of service tax on services, complexities of ‘works contract’ increased as issue of valuation, TDS and reverse charge made this issue complex.<\/span><\/p>\n

After introduction of GST and abolition of distinction between goods and services, really the concept of ‘works contract’ has become redundant. However, this term is continuing in GST also.<\/span><\/p>\n

“<\/strong>Works contract”<\/strong> 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 – section 2(119) of CGST Act.<\/span><\/p>\n

Works contract as defined in section 2(119) of CGST Act is ‘supply of service’ – para 6(a) of Schedule II of CGST Act.<\/strong><\/span><\/p>\n

Distinction Between Construction Service And Works Contract Service<\/strong><\/span><\/h2>\n

Construction contract is also a ‘works contract’. However, under GST, distinction has been made between ‘works contract service’ and ‘construction of complex’.<\/span><\/p>\n

The distinction is that in case of works contract, a customer (recipient of supply of service) approaches the supplier of service (contractor) to undertake construction as per his requirements. In almost all the cases, the land is owned by or taken on lease by customer. The contractor enters into contract with customer and then undertakes construction with his own material. If the material is supplied by recipient himself (customer), then it is not works contract. It is simple contract for work.<\/span><\/p>\n

In construction of complex, the builder or developer normally does not have any identified customer. Even if he has some identified customers before commencement of construction, he is undertaking construction activity on his own and not on basis of contract with customer. The land never belongs to the customer.<\/span><\/p>\n

As an illustration, a society awards a contract to a contractor to construct residential complex in premises owned by society, it will be a ‘works contract’ and not ‘construction of complex’.<\/span><\/p>\n

Construction Of Residential, Commercial Or Industrial Complex<\/strong><\/span><\/h2>\n

As per para 5(b) of Schedule II of CGST Act, following is ‘supply of service’<\/span><\/p>\n

\u2018Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after<\/strong> issuance of completion certificate, where required, by the competent authority or after its first<\/em><\/strong> occupation, whichever is earlier<\/em><\/strong>.\u2019<\/span><\/p>\n

Explanation. <\/em>\u2014For the purposes of this clause-<\/span><\/p>\n