Sir,
We have entrusted house construction to a contractor, He says, we have to GST on the entire amount of total contract, we are availing only his service, we are paying the amount by taking loan.. Kindly advise me about the GST act or law
Ans: There are certain factors on which the applicability of GST depends on the services provided by the contractor such as-
• If the construction is for your own only self residence and not for business purposes, then you generally do not need to pay GST on the contractor's services, even if you took a home loan.
• If the construction is for commercial purposes or you intend to sell the property, GST will usually be applicable on the contractor's services at the standard rate of 18%.
• If the contract involves the contractor providing both labour and materials, it's considered a "works contract".
• GST is applicable on the entire contract value (excluding land cost) at the appropriate rate mentioned above.
• If the contract involves the contractor only providing labour, and you separately buy the materials, it's considered a "labour contract".
• No GST is payable on the labour charges under the current regulations.
Note- Taking a loan for construction wouldn't impact the applicability of GST on the contractor's services.
There are various other clauses in the GST part; for more clarity, please connect with a legal advisor.