What Is Composite Supply of Works Contract under Gst

As per the GST regime, a works contract is considered to be a contract wherein labor and services are being provided along with the supply of goods. Under GST, works contracts are liable to be taxed, and it is important to understand the concept of composite supply of works contract.

A composite supply refers to the supply of two or more goods or services or both together, which are provided in conjunction with each other in the normal course of business. Under GST, composite supply is taxed as a whole, with the tax rate applied to the principal supply.

In the case of works contracts, a composite supply can occur when two or more services or goods are provided together. For example, the construction of a building involves the supply of labor, services, and goods such as cement, steel, and other materials. In this case, a composite supply of works contract is considered to occur.

Under GST, the tax rate for a composite supply of works contract is based on the principal supply. The principal supply is the supply of goods or services that forms the predominant part of the composite supply. In the case of construction contracts, the principal supply is considered to be the supply of goods i.e., the materials used in construction.

It is important to note that for a composite supply of works contract, the taxability of various components of the contract may differ. For example, the supply of goods i.e. materials used in construction will be taxed at the applicable GST rate for goods, while the supply of labor and services will be taxed at the applicable GST rate for services.

In conclusion, understanding the concept of composite supply of works contract is crucial for businesses in the construction industry. The GST regime has brought about significant changes in the taxation of works contracts and it is important for businesses to be well-versed with the same to avoid any non-compliance issues.