Gst Rate on Government Works Contract Change Notification

The Indian government has recently issued a notification that changes the GST rate on government works contracts. The notification, which was issued on March 14, 2020, aims to simplify the tax structure and provide relief to contractors who have been struggling with the high rates of GST on their works contracts.

Under the new notification, the GST rate on works contracts awarded by the government is reduced from 18% to 12%. This change applies to works contracts that have been awarded on or after October 1, 2019. The reduction in GST rate is expected to provide much-needed relief to contractors who have been struggling with the high tax rates.

The notification also provides clarity on the GST rates that will be applicable for different types of works contracts. For example, if a works contract involves the supply of both goods and services, the GST rate will be based on the percentage of the contract value that is attributable to the supply of goods and services. If the supply of goods is less than 25% of the total contract value, the GST rate will be 12%. However, if the supply of goods is more than 25% of the total contract value, the GST rate will be 18%.

The notification also provides relief to contractors who are involved in the construction of affordable housing projects. Under the new rules, the GST rate for works contracts related to affordable housing projects will be 8%. This is a significant reduction from the earlier rate of 12%.

Overall, the changes in GST rates for government works contracts is a welcome move by the Indian government. The reduction in GST rates will provide relief to contractors who have been struggling with the high tax rates, and will also simplify the tax structure for government works contracts. However, it is important for contractors to understand the new rules and ensure that they are compliant with the latest GST regulations.