What parameters are CFOs
focusing on to avoid GST scrutiny?
What parameters are CFOs focusing on to avoid GST scrutiny?
Book a demo to find out!
Index

Activities Clearly Classified As Goods Or Services under GST

Updated on: Jul 6th, 2021

|

2 min read

Works contract was treated as both goods and supply in the pre-GST regime. Both VAT and service taxes were applicable on it. There were various rates, composition schemes available for works contractors with many complexities thus resulting in many case laws.

Simplify Your GST Filing & Invoicing

Get Trained & Try Cleartax GST Software for FREE

Start Free GST Software Trial & Training

Latest Updates – Union Budget 2021 Outcome

activities clearly classified as goods or services under gst

Schedule II of the GST Act has certain activities clearly classified as goods or services under GST to avoid any such confusion For example,

Works contract is a composite supply involving both goods (bricks, cement, steel bars and many other items) and services (labour for construction, architect, engineers etc).

Currently, VAT is payable on the works contract (rate varies from state to state). Service tax is paid @15% on either 40% (on new work) or 70% (on repair, maintenance work) There’s a works contract for a new construction value of Rs. 50,00,000.

Sale value50 lakhs
Cost of material20 lakhs
Cost of labour 10 lakhs
Value of land5 lakhs
Profit 15lakhs

Under VAT & service tax:

VAT @14.5% (20 lakhs*14.5%)2,90,000
Service Tax @ 6% (40% of 15%) (50 lakhs*6%)3,00,000
Total tax5,90,000
OR Pay tax under composition scheme (45=50: value of land 5)

0.6% on Rs. 45 lakhs= 27,000

Now entire works contract under GST will be treated as supply of services. The value of a supply would typically be the transaction value ie in this case Rs.50 Lakhs and tax applicable is 18%

 Assuming 18% GST
GST9,00,000

Thus, the innumerable complexities and confusion regarding the works contact tax treatment is simplified under GST. Activities clearly classified as goods or services under GST will help to remove complexities and reduce legal action. Visit ClearTax to read about activities which will be treated as supply irrespective of consideration and other GST terms.  

inline CTA
India’s Fastest and Most Advanced 2B Matching
Maximise ITC claims, use smart validations to correct your data and complete 2B matching in <1 minute
summary-logo

Quick Summary

Works contract was treated as both goods and supply in the pre-GST era. VAT and service taxes applied. Under GST, it is considered a supply of services at 18% tax rate. Complexities were reduced with clear classification under GST

Was this summary helpful?
liked-feedbackliked-feedback

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use

ISO

ISO 27001

Data Center

SSL

SSL Certified Site

128-bit encryption