Taxation of Composite and works contract under GST ACT, 2017
1. The works contract (Including any transfer of property in goods in the execution of contract) related to immovable property shall be treated as supply of service. Works contract as well as sale of under construction apartment shall be subjected to GST. Currently service tax charge on 40% of project value, thus the effective service tax rate is 6%, similarly effective vat rate around 1% charge on project value in different state. In GST work contract service shall be taxable @ 18%. 2. The sale of under constructed property shall be liable to GST @ 12 %.( including value of land). Presently tax effective tax rate is 4.5% (15% of 30% value of project including land). 3. On other hand full credit of input tax is allowed comparing to current regime where input credit is not allowed, therefore it seem beneficial to real estate industries. 4. Now, question arises in mind what will be treatment of composite contract related to movable property, the concept of composite supply and mix supply has been insert in GST Bill, 2017. 5. Once it is clear that work contract will be tax in GST as service, the distinction between goods and service is relevant only for Place of supply and Point of Taxation. 6. The transaction of sale/ purchase of immovable property shall be constitutionally outside the ambit of GST and shall be liable to stamp duty and property tax under state law.
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