 "Industry")
The construction and hospitality industries raised issues ranging from the need for a special mechanism for payment of goods and services tax (GST) on government-related contract works to clarification on input tax credit (ITC) during a meeting with the Central Bureau of Indirect Taxes and Customs (CBIC) on Thursday.
This comes after the Centre announced GST rate rationalisation last week as part of indirect taxation reforms initiated by the Union finance ministry.
According to sources present at the meeting, while welcoming the move, the construction industry requested amendments to the GST Act to allow contractors to make GST payments for government-related works on a receipt basis or via some other special mechanism. An industry expert said that the “time of supply” is the practical issue, as work bills are generated based on measurement books maintained by government departments.
“Contractors face practical difficulties with invoicing because payments are often delayed even after the work is completed by most government authorities,” he said.
The industry also requested a reduction in the GST rate on providing earthwork services, a construction activity now taxed at 18 per cent, up from the previous 12 per cent.
“The nature of earthwork does not involve major ITC. These works are all government-related. Paying GST at 18 per cent ties up working capital until bills are received from the government and its authorities,” an executive from the Builders Association of India told Business Standard.
He added that the association requested the rate be brought down to the 5 per cent slab.
The body also sought a refund of excess ITC under an inverted duty structure, including ITC on services. “Currently, works contract services are classified as services under the Central GST Act, 2017. There are numerous issues during refund filings in an inverted duty structure. The department often treats contractors’ services as akin to real estate, which is incorrect,” a source involved in the meeting said.
The industry has asked for official clarification on refunds under the inverted duty structure and requested amendments to allow ITC on input services to be considered eligible and refundable as cash ledger credits.
The hospitality sector raised concerns over the GST Council’s decision to remove ITC in the 5 per cent slab for rooms priced under ₹7,500 per night. Officials said this could create bottlenecks in implementing new rates, potentially disincentivising investment and expansion in the midscale hotel segment, and prompting some players to even raise room rates.
Earthwork tax jump, ITC woes stir action
- Delayed bills and invoicing complicate GST payments
- GST on earthwork services hiked from 12% to 18%
- ITC removed for rooms under ₹7,500
Industry calls
- Special GST payment mechanism for government-related works
- Cut GST on earthwork services to 5%
- Clear rules on ITC in books and advance customer payments
