Construction Service under GST

GOODS AND SERVICES TAX
CONSTRUCTION ACTIVITY – SUPPLY OF
SERVICE
CA NEMISH J. SHAH
(B.Com, D.I.S.A., A.C.A.)

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nemishjshah@gmail.com
Provisions relating to Construction Activity
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;
Schedule
II – Clause
5(b)
Construction 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 issuance of completion certificate,
where required, by the competent authority or after its first
occupation, whichever is earlier.
Explanation - For the purposes of this clause—
(1) the expression "competent authority" means the
Government or any authority authorised to issue
completion certificate under any law for the time being in
force and in case of non-requirement of such certificate
from such authority, from any of the following, namely:—
i.an architect registered with the Council of Architecture
constituted under the Architects Act, 1972; or
ii. a chartered engineer registered with the Institution
of Engineers (India); or
iii. a licensed surveyor of the respective local body of
the city or town or village or development or planning
authority;
(2) the expression "construction" includes additions,
alterations, replacements or remodelling of any existing
civil structure;
Supply of Service
Schedule
II – Clause
6(a)
works contract as defined in clause (119) of section 2;
Supply of Service
Schedule
III –
Clause 5
Sale of land and, subject to clause (b) of paragraph 5 of
Schedule II, sale of building.
Neither Supply of Goods nor supply of services
Section
2(15) of
“location of the supplier of services” means, ––
(a) where a supply is made from a place of business for

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IGST Act which the registration has been obtained, the location of
such place of business;
(b) where a supply is made from a place other than the place
of business for which registration has been obtained (a
fixed establishment elsewhere), the location of such fixed
establishment;
(c)where a supply is made from more than one
establishment, whether the place of business or fixed
establishment, the location of the establishment most
directly concerned with the provision of the supply; and
(d) in absence of such places, the location of the usual place
of residence of the supplier;
Section
2(7) of
IGST Act
“fixed establishment” means a place (other than the
registered place of business) which is characterised by a
sufficient degree of permanence and suitable structure in terms
of human and technical resources to supply services or to
receive and use services for its own needs;
Section
12(3) of
IGST Act
Place of Supply of Services where Location of Supplier
and Recipient is in India
The place of supply of services, ––
(a) directly in relation to an immovable property, including
services provided by architects, interior decorators,
surveyors, engineers and other related experts or estate
agents, any service provided by way of grant of rights to
use immovable property or for carrying out or co-
ordination of construction work; or
…..
(d) any services ancillary to the services referred to in clauses
(a), (b) and (c),
shall be the location at which the immovable property or boat or
vessel, as the case may be, is located or intended to be located:
Provided that if the location of the immovable property or boat
or vessel is located or intended to be located outside India, the
place of supply shall be the location of the recipient.
Explanation. – Where the immovable property or boat or vessel
is located in more than one State or Union territory, the supply
of services shall be treated as made in each of the respective
States or Union territories, in proportion to the value for
services separately collected or determined in terms of the
contract or agreement entered into in this regard or, in the
absence of such contract or agreement, on such other basis as
may be prescribed.

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Section
13(5)
Subject to the provisions of clause (d) of sub section 3, in case
of continuous supply of services,
(a) where the due date of payment is ascertainable from the
contract, the invoice shall be issued on or before the due
date of payment;
(b) where the due date of payment is not ascertainable from the
contract, the invoice shall be issued before or at the time
when the supplier of service receives the payment;
(c) where the payment is linked to the completion of an event,
the invoice shall be issued on or before the date of
completion of that event.
Section
17(5)(c)
Notwithstanding anything contained in sub-section (1) of
section 16 and subsection (1) of section 18, input tax credit
shall not be available in respect of the following namely:
works contract services when supplied for construction of
immovable property, (other than plant and machinery), except
where it is an input service for further supply of works contract
service;
Section
17(5)(d)
goods or services or both received by a taxable person for
construction of an immovable property (other than plant and
machinery) on his own account, including when such goods or
services or both are used in the course or furtherance of
business;
Explanation. - For the purpose of clause (c) and (d), the
expression “construction” includes re-construction, renovation,
additions or alterations or repairs, to the extent of
capitalization, to the said immovable property.

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Supply
 Works contract relating to an immovable property involving transfer of
property in goods
 Construction activity intended for sale to a buyer, where the part or
full consideration is received before issuance of completion certificate
or before its first occupation, whichever is earlier.
The following transaction shall not be treated as supply under Section 7:
 Sale of land
 Sale of building where the entire consideration has been received after
issuance of completion certificate or before its first occupation,
whichever is earlier
Levy of tax:
 CGST shall be levied on all intra-state supplies of goods or services or
both on the value determined under Section 15
 IGST shall be levied on all inter-state supplies of goods or services or
both
Intra-state tax Vs. Inter-state tax
To determine whether CGST and SGST shall be charged or IGST shall be
charged on a particular transaction:
 Where the location of Supplier and the Place of Supply are in
same state, it shall be treated as intra-state supply and where the
location of supplier and the place of supply are in two different states
it shall be treated as inter-state supply.
 CGST and SGST to be charged in case of intra-state supply
 IGST to be charged in case of inter-state supply
 To understand the applicability of intra-state supply and inter-state
supply, we first shall be required to understand the concept of
“location of supplier” and “place of supply”.
Location of supplier of services:
 Generally, the location of supplier of services shall be the place of
business for which registration has been obtained or the location of

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fixed establishment, where the supply is made from such place of
business or fixed establishment.
 For the construction activity under consideration, the location of
supplier shall be the place of business of the supplier from where the
supply is made. In this scenario, the place of business may be at a
different location than the actual construction site.
 Further, if there is a fixed establishment at the construction site, then
it shall be treated as location of supplier of service.
Illustration:
Place of
business
for which
registration
taken
Fixed
establishment
Construction
site
Usual
place of
residenc
e of
supplier
Location
of
Supplier
Ahmedabad Rajkot Rajkot Mumbai Rajkot
Ahmedabad - Ahmedabad Mumbai Ahmedabad
Ahmedabad - Rajkot* Mumbai Mumbai
Ahmedabad - Rajasthan Mumbai Mumbai
Ahmedabad Rajasthan Rajasthan Mumbai Rajasthan
*Rajkot is not having separate registration or not shown as additional
place of business. If it is shown as additional place of business, then
Location of supplier shall be Ahmedabad.
The definition uses the term “place”, and not the phrase “State or
Union Territory”. Therefore, a view may be taken that where the
services are provided from a place of business which is neither
registered nor fixed establishment, location of supplier can be the
usual place of residence of supplier notwithstanding the fact that the
place of business from where the services is provided in the same
state where another place of business is registered.
Place of supply of services:
 Services in relation to immovable property shall be the location at
which the immovable property is located or intended to be located.
 It is important to note that even where either the location of supplier
or location of recipient is outside India, the place of supply in relation

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to immovable property shall be the place where the immovable
property is located or intended to be located.
 All the services in relation to immovable property which are explicitly
covered as well as all other services which have proximity to
immovable property shall be included. Even services ancillary to the
primary services are to be covered here.
 Goods required in construction activity received as stock before being
assigned to any particular site will not be determined by this provision
but the general provision.
Location of Supplier Place of Supply CGST and SGST/
IGST
Gujarat Gujarat CGST and Gujarat
SGST
Gujarat Maharashtra IGST payable at
Gujarat
Time of supply of services:
The liability to pay tax on services shall arise at the time of supply.
 The time of supply of services shall be earliest of the following dates,
a) The date of issue of invoice by the supplier, if invoice is issued
within the period prescribed u/s. 31(2) or the date of receipt of
payment, whichever is earlier or
b) The date of provision of service, if invoice is not issued within
the period prescribed u/s. 31(2) or the date of receipt of
payment, whichever is earlier or
c) The date on which the recipient shows the receipt of services in
his books of account, in case (a) or (b) above do not apply.
Date of receipt of payment shall be the date on which the payment
is entered in the books of account of the supplier or the date on which
the payment is credited to his bank account, whichever is earlier
Where it is not possible to determine the time of supply as per above
provisions, the time of supply shall-
a) In case where a periodical return has to be filed, be the date on
which such return is to be filed or
b) In any other case, be the date on which the tax is paid.

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Illustration:
Date of
provision
of service
Date of
issue of
invoice
Due Date
of invoice
issue as
per Section
31(2)
Date of
receipt of
payment
Time of
Supply
30.04.2017 15.05.2017 30.05.2017 14.05.2017 14.05.2017
30.04.2017 15.05.2017 30.05.2017 24.04.2017 24.04.2017
30.04.2017 15.05.2017 30.05.2017 18.05.2017 15.05.2017
30.04.2017 03.06.2017 30.05.2017 14.05.2017 30.04.2017
30.04.2017 03.06.2017 30.05.2017 25.04.2017 25.04.2017
 Sometimes, it may be possible that the duration of works contact is for
a long period and the contractor is entitled to receive the contract
revenue on the basis of completion of certain activities based on the
contract. Under such scenario, one may take a view that it is a
continuous supply of service and all the provisions related to issue of
invoice u/s 31(5) shall be applicable.
Value of Taxable Supply
 The value of supply of construction service shall be the transaction
value which is the price actually paid or payable and where the
supplier and the recipient are not related and the price is the sole
consideration for the supply.
 Value of supply shall include all other taxes and duites other than
CGST, SGST, UTGST, IGST.
 It shall include subsidies directly linked to the price but shall not
include subsidies provided by the Central Government and State
Government.
 It is pertinent to note that no exclusion is provided on account of
retentions or other deductions which are made from the contract
revenue. Thus, tax shall be paid on the gross amount.
Input Tax Credit
 Every registered person shall be entitled for credit of inputs tax
charged in respect of supply of goods or services or both which are
used or intended to be used in the course or furtherance of business.

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 All goods or services should be used for business purpose and for
making taxable supply.
 Conditions for claiming input tax credit:
a) Possession of invoice or debit note issued by the supplier
b) Receipt of goods or services or both
c) Supplier has paid tax to the government on such supply of goods
or services
d) Return has been filed by the registered person claiming credit
 Input tax credit taken shall be added to the output tax liability along
with interest, if the recipient fails to pay to the supplier of goods or
services or both, the amount of supply plus tax thereon within 180
days from the date of issue of invoice.
 Credit with respect to all the supply of goods or service shall be
available for construction business except as under:
a) Works contract service when supplied for construction of an
immovable property
 Works contract service supplied for plant and machinery
shall be available
 Where works contract service is an input service for further
supply of works contract service i.e. sub-contracts work,
credit shall be available.
b) Goods or services or both received for construction of immovable
property for own use even in the course or furtherance of
business – credit shall not be allowed
 Credit for goods or services received for construction of
plant and machinery allowed
(“Construction” includes re-construction, renovation, additions or
alterations or repairs, to the extent of capitalization, to the said
immovable property)
It is pertinent to note that credit with respect to any repairs or
renovation or alterations which are not capitalized in the books of
account shall be allowed.
GST RATES FOR CONSTRUCTION SERVICES
Construction of a complex, building, civil structure or a
part thereof, intended for sale to a buyer, wholly or
partly.
[The value of land is included in the amount charged
from the service recipient]
12%
With Full ITC
but no
refund of
overflow of

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ITC
Composite supply of Works contract as defined in
clause 119 of section 2 of CGST Act
18%
With Full ITC
Services provided by way of pure labour contracts of
construction, erection, commissioning, installation,
completion, fitting out, repair, maintenance, renovation,
or alteration of a civil structure or any other original
works pertaining to the Beneficiary-led individual house
construction / enhancement under the Housing for All
(Urban) Mission/Pradhan Mantri Awas Yojana (PMAY);
Exempt
Services by way of pure labour contracts of
construction, erection, commissioning, or installation of
original works pertaining to a single residential unit
otherwise than as a part of a residential complex;
Exempt
Classification Scheme
Service Code (Tariff) Service Description
Construction services of buildings
995411
Construction services of single dwelling or multi
dewlling or multi-storied residential buildings
995412
Construction services of other residential buildings
such as old age homes, homeless shelters, hostels
etc
995413
Construction services of industrial buildings such
as buildings used for production activities (used
for assembly line activities), workshops, storage
buildings and other similar industrial buildings
995414
Construction services of commercial buildings
such as office buildings, exhibition & marriage
halls, malls, hotels, restaurants, airports, rail or
road terminals, parking garages, petrol and
service stations, theatres and other similar
buildings.
995415
Construction services of other non-residential
buildings such as educational institutions,
hospitals, clinics including vertinary clinics,
religious establishments, courts, prisons,
museums and other similar buildings
995416 Construction Services of other buildings n.e.c
995419
Services involving Repair, alterations, additions,
replacements, renovation, maintenance or
remodelling of the buildings covered above.

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General construction services of civil
engineering works
995421
General construction services of highways,
streets, roads, railways and airfield runways,
bridges and tunnels
995422
General construction services of harbours,
waterways, dams, water mains and lines,
irrigation and other waterworks
995423
General construction services of long-distance
underground/overland/submarine pipelines,
communication and electric power lines (cables);
pumping stations and related works; transformer
stations and related works.
995424
General construction services of local water &
sewage pipelines, electricity and communication
cables & related works
995425
General construction services of mines and
industrial plants
995426
General Construction services of Power Plants and
its related infrastructure
995427
General construction services of outdoor sport and
recreation facilities
995428
General construction services of other civil
engineering works n.e.c.
995429
replacements, renovation, maintenance or
remodelling of the constructions covered above.
Site preparation services
995431 Demolition services
995432
Site formation and clearance services including
preparation services to make sites ready for
subsequent construction work, test drilling &
boring & core extraction, digging of trenches.
995433 Excavating and earthmoving services
995434
Water well drilling services and septic system
installation services
995435 Other site preparation services n.e.c
995439
replacements, maintenance of the constructions
covered above.
Assembly and erection of prefabricated
constructions
995441 Installation, assembly and erection services of

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prefabricated buildings
995442
Installation, assembly and erection services of
other prefabricated structures and constructions
995443
Installation services of all types of street furniture
(e.g., bus shelters, benches, telephone booths,
public toilets, etc.)
995444 Other assembly and erection services n.e.c.
995449
covered above.
Special trade construction services
995451 Pile driving and foundation services
995452 Building framing & Roof Framing services
995453 Roofing and waterproofing services
995454 Concrete services
995455 Structural steel erection services
995456 Masonry services
995457 Scaffolding services
995458 Other special trade construction services n.e.c.
995459
covered above.
Installation services
995461
Electrical installation services including Electrical
wiring & fitting services, fire alarm installation
services, burglar alarm system installation
services.
995462 Water plumbing and drain laying services
995463
Heating, ventilation and air conditioning
equipment installation services
995464 Gas fitting installation services
995465 Insulation services
995466 Lift and escalator installation services
995468 Other installation services n.e.c.
995469
replacements, maintenance of the installations
covered above.
Building completion and finishing services
995471 Glazing services
995472 Plastering services
995473 Painting services
995474 Floor and wall tiling services
995475 Other floor laying, wall covering and wall papering

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services
995476 Joinery and carpentry services
995477 Fencing and railing services
995478
Other building completion and finishing services
n.e.c.
995479
replacements, maintenance of the
completion/finishing works covered above.

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