Rate of Tax on Sub-Contractors--Implications of Recent Changes
Hitherto, services provided by sub-contractors to main contractors providing certain specified construction services, were enjoying concessional rate of tax as was applicable to the main contractors. In the recent past, the Central Government has made various amendments in Notification No. 11/2017-Central Tax (Rate), dt. 28-6-2017 so as to remove the concessional rate of tax for the sub-contractors providing specified construction services to main contractor. The learned author aims at making overview of the recent changes.
With every meeting, the GST Council has been withdrawing the concessional rate of tax provided in respect of construction as well as works contract service.
Upto 31-12-2021, certain construction and works contract services provided to Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government entity were chargeable to tax at the concessional rate of tax of 12%.
With effect from 1-1-2022, services provided to a Governmental Entity or a Government entity were excluded from the category of concessional rate of tax.
Also, with effect from 18-7-2022, the concessional rate of tax as specified in item (iii), (vi) and (vii) of Sl. No. 3 of the Notification No. 11/2017-Central Tax (Rate), dt. 28-6-2017, has been omitted at all.
Consequently, with effect from the said date, the above services have become chargeable to tax at the general rate of 18%.
The scope and implication of the above changes are being discussed hereunder.
2. Services related to public utility supplied to Government, local authority, etc.
(i) Position upto 31-12-2021
As per item (iii) of Sl. No. 3 of the Table appended to Notification No. 11/2017-Central Tax (Rate), dt. 28-6-2017, as it stood upto 31-12-2021, composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government entity by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of, --