Looking for a business loan


Thank you for your interest, our team will get back to you shortly

Please Fill the Details to download

Thank you for your response

Get Expert Assistance

Thank you for your response

Our representative will get in touch with you shortly.

Activities Clearly Classified As Goods Or Services under GST

Updated on :  

08 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

Union Budget 2021 Outcome
a. Exemption from ITR filing to senior citizens aged 75 years and above, earning only pension and interest income.
b. The income tax department launched pre-filled ITRs with additional details to simplify the return filing process.
c. The due date for filing belated and revised returns is reduced by 3 months. This also means that the IT department will have to process the returns and send a notice under section 143(1) by 31st December.

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

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