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Select composite supply of work contract supplied by a subcontractor to main contractor is taxable @ 12%

Recently AAR gave an important ruling dated 16th September 2019, regarding the work contract services in case of VK Building service (P.) Ltd. . [2019] 110 taxmann.com 198 (AAR - KARNATAKA) which is discussed as below:

Facts of the case
  • The applicant, engaged in Civil Construction and Works Contract Services, entered into an agreement to undertake the sub-contract work of civil construction of residential complexes/ row of residential houses, allotted by main contractor Gowri Infra Engineers Private Limited (“GIPL”) through tender by the Bengaluru Development Authority(Government authority).
Issue Involved
  • Whether the activity undertaken by the applicant is covered under works contract?
  • What is the rate of tax on the said transaction?
Observation/Ruling
  • As per section 2(119) "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.
  • Therefore the activity undertaken by the applicant is covered under section 2(119) of the Central Goods and Services Tax Act and is a works contract services.
  • As per entry No. 3 (ix) of Notification No.11/2017 – Central Tax (Rate) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 provided by a sub-contractor to the main contractor providing services specified in item (iii) or item (vi) to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity.

Please click here for Advance Ruling.

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