GST is to be charged on Free issue material under Work Contract or not

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GST is to be charged on Free issue material under Work Contract or not 2017-08-11T15:12:54+00:00

GST India Forum – Goods and Services Tax (GST) in India Forums Discussion GST is to be charged on Free issue material under Work Contract or not

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  • CA AMOD GUPTACA AMOD GUPTA
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    #2486 |

    Subject Matter:- GST is to be charged on Free issue material under Work Contracts

    Work Detail:-
    We are executing a job with Indian Oil Corporation Limited (IOCL) under works contract. The contract is item based. Most of items includes supply of material and services. Few items are for erection only. The material for erection items are to be supplied free of cost by client i.e. IOCL.

    Earlier applicable law:-
    Till 30th June 2017 we were covered under Composition scheme of Service tax under Rule 2A of Service Tax Rules, 2006, in which service tax was charged @ 15% on 40% of contract value i.e. 6% of transaction value inclusive of Cost of Free issue material.

    Under GST:-
    Under GST there is no provision of composition scheme, the applicable flat rate is 18% on contract value in case of work contract service.
    Further, as per sub clause 2(b) of section 15 of CGST Act 2017, “any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both.”
    As per the above provisions, our company is to pay GST while receiving the Free issue material from IOCL and to charge GST from IOCL when we raise our bills including the Fair market value of such Free issue material.

    Our Concern:-
    Since IOCL has already paid GST on material (Free issue to our company) while purchasing and IOCL is also likely to pay GST when we charge from them as per section 15(2)(b) of CGST Act, 2017. Please let us know how to avoid double taxation.
    Is it substantiate if IOCL collect GST from our company while issuing the Free issue material (since IOCL has already paid GST on it) and pay GST as per section 15(2)(b) of CGST Act, 2017. We as service provider take cenvat credit of GST paid to IOCL.

    Please advise us on this matter.

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