Increase in tax rate from 12% to 18% on government contract works

Government of Karnataka
(Department of Commercial Taxes)

No: KGST/CR.136/2021-22                                                                                                                                       Office of the Commissioner

                                                                                                                                                                              Of Commercial Taxes

                                                                                                                                                                                     Commercial tax office,

Gandhinagar, Bangalore

Date: 06-04-2024

     

To

Additional Chief Secretaries

Of Government

(Finance Department)

Vidhan Soudha

Bangalore

Honorable,

Subject: As per Central Government Notification dated: 01-01-2022 regarding increase

in tax rate from 12% to 18% on  government contract works with effect from 01-01-2022

Reference:  1. Government Letter No: AE 01 CSL 2021 Bangalore Dated: 28-12-2021

(Sr. No-3) In letter dated 28-01-2022 (Sr. No-7)

2. Karnataka state contractors association, Chamarajpet, Bangalore

letter dated: 06-12-2021

3. Me: North Karnataka Civil Contractors Association, Dharwad

letter dated: 31-02-2022

****

In regard to the above matter, the Government has forwarded reference (1) letter of Karnataka State Contractors Association, Chamarajpet Bangalore with reference (2) letter and M: Uttar Karnataka Civil Contractors Association, Dharwad letter of reference (3) to this office, to examine the matter requested by the petitioners. Necessary action is advised to be taken.

Petitioner Karnataka State Contractors Association, Chamarajpet, Bangalore vide letter of reference (2) has requested that, According to the Central Government Notification (Tax Rate) No-15/2021 Dated: 18-12-2021, from 01-01-2022, the prevailing tax rate of 12% has been increased to 18% on Government Contract Works as applicable.  Accordingly, a notification should be issued in the state to implement 18% tax on government contract works carried out in the state from date: 01-01-2022.

Me: North Karnataka Civil Contractors Association, Dharwad, in reference (3) letter has requested for approval of increase in GST rate from 12% to 18% with effect from 01-01-2022 to contractors carrying out government works.

Regarding the matter sought by the petitioners, about the government contract works under the Karnataka Goods and Services Tax Act, 2017 and the Central Goods and Services Tax Act, 2017. The following tax rate notifications has been issued by the government:

1. Notification Number: 11/2017 dated 28-06-2017
2. Notification Number: 20/2017 dated 22-08-2017
3. Notification Number: 24/2017 dated 21-09-2017
4. Notification Number: 31/2017 dated 13-10-2017
5. Notification Number: 15/2021 dated 18-11-2021
6. Notification Number: 22/2017 dated 01-01-2022

As per the above notifications, the rate of tax applicable to government contract works;

• If the supply of works contract services provided to Central Govt, State Govt. Union Territory and Local Authority, the rate of tax for works contract services supplied is continued to be 12%.
• If the supply of works contract services provided to Government Authority and Government entity, the rate of tax applicable is 18% wef 01-01-2022

The above information is respectfully submitted and has been duly signed by the respected Commissioner of Commercial Taxes, Karnataka, Bangalore

Conclusion: To clarify, the tax rate for works contract services is 12% when provided to the core Government (Central, State, Local), and 18% when provided to Government Authorities or Entities (organizations or agencies established by the government to perform particular functions) Applicable from January 1, 2022.