What is Works Contract?

Works contract under GST means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.

Works for Immovable property only comes under the meaning of works contract.

In the execution of contract there should be a transfer of property in goods. Goods here is not same as consumables. The nature of goods remain intact even on transfer. In case of consumables, the nature of changes as they are consumed during the contract.

Works contracts shall be treated as a supply of services under GST.

Works contract under GST


The business structure and nature of any works contractor generally makes it mandatory for the industry to have a separate place of business/site and a reporting head quarter/office.

Normally the site will provide the works contract services and the office will support such services by providing business support services.

The site can be added as an additional place of business in the registration form. All invoices need to be raised to and from the reporting office.

As explained in the above scenarios it would be prudent for every works contractor to take multiple registrations for its site office and its reporting office if they are located in different states.


The value of supply shall include

1. Taxes, Cesses or Fees charges levied under any other law being in force, if charged separately by the supplier.

2. Any amount that the supplier is liable to pay in relation to supply but has been incurred by the recipient and not included in the price actually paid or payable. Eg: Reimbursements taken on behalf of the supplier incurred by recipient.

3. Incidental expenses charged by the supplier for supply of goods such as transportation, insurance etc.

4. Interest or late fee for delayed payment of any consideration for any supply.

5. Subsidies directly linked to the price excluding any subsidies provided by central or state government.

Valuation of a works contract service is also dependent upon whether the contract includes transfer of property in land. In case of supply of service, involving transfer of property in land, the value of supply of service and goods portion in such supply shall be equivalent to the total amount charged for such supply less the value of land (assumed to be one third of the total amount charged for such supply)

Place of Supply

The place of supply would be where the immovable property is located.

In case the immovable property is located outside India, and the supplier as well as recipient both are located in India, the place of supply would be the location of recipient.

Input Tax Credit

Input tax credit shall not be available in respect of the works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service (one who is in the same line of business).

For example a building developer may engage services of a sub-contractor for certain portion of the whole work. The sub-contractor will charge GST in the tax invoice raised on the main contractor. The main contractor will be entitled to take ITC on the tax invoice raised by his subcontractor as his output is works contract service.

However if the main contractor provides works contract service (other than for plant and machinery) to a company say in the technology business, the ITC of GST paid on the invoice raised by the works contractor will not be available to the tech Company.


1. Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution

2. Services by Central Government, State Government, Union territory, local authority or governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution. (This will include works contract)

3. Services by a governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution. (This includes works contract)

4 Services provided by way of pure labour contracts of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works pertaining to the beneficiary-led individual house construction or enhancement under the Housing for All (Urban) Mission or Pradhan Mantri Awas Yojana

5 Services by way of pure labour contracts of construction, erection, commissioning, or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex.

Definition of Work contract under GST, registration, valuation
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