Works contract under Revised Model GST Law
Works Contract definition under Revised Model GST Law
Section 2(110) of Revised Model GST Law,
(110) “works contract” means a contract wherein transfer of property in goods is involved in the execution of such contract and includes contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property;
Clause 5(f) Schedule II of Revised Model GST Law, works contract including transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; as supply of service’.
Issue with Works Contract definition under Revised Model GST Law
- The definition ‘works contract’ in terms of section 2(107) commences with the words means. Thus, the meaning could be restrictive.
- Further the words manufacture / processing is missing from the definition of works contract. In this scenario what happens to contracts like photography, electroplating, supply and fixing / laying of tiles etc. There is, therefore, no clarity.
- The model GST law provides that Works Contract Activity would be considered as Supply of Service. However, the terms processing & manufacture are missing in the definition of Works Contract. Further, the Article 366(29A) of constitution provides that works contract services will include deemed sales which also requires due attention.
Suggestion relating to Works Contract under Revised Model GST Law
- The definition of term “works contract” be amended to substitute the word ‘means’ by the word “includes”
- the definition of term “works contract” be amended to add the words manufacture, processing, maintenance therein.
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