{"id":91097,"date":"2026-11-14T23:30:00","date_gmt":"2026-11-14T18:00:00","guid":{"rendered":"https:\/\/www.taxaj.com/learn\/?p=91097"},"modified":"2026-11-14T23:30:00","modified_gmt":"2026-11-14T18:00:00","slug":"gst-works-contract-kolkata-government-contractors","status":"publish","type":"post","link":"https:\/\/www.taxaj.com/learn\/gst-works-contract-kolkata-government-contractors\/","title":{"rendered":"GST on Works Contracts in Kolkata: 18% From September 2025 for Government Works, Credit on Buildings, and Contractor TDS"},"content":{"rendered":"<p class=\"wp-block-paragraph\"><strong>A works contract \u2014 construction, fabrication, installation, repair or renovation of immovable property involving both goods and services \u2014 is taxed as a service under GST. Most works contracts are taxed at 18%. Specified works contracts for the government, local authorities and governmental authorities (such as roads, bridges, water supply and other civil works), which earlier enjoyed a 12% rate, moved to 18% with input tax credit from 22 September 2025. Pure services without goods to a municipality or panchayat for their constitutional functions remain exempt.<\/strong> Government departments, KMC and other public bodies deduct 2% GST TDS on contracts above \u20b92.5 lakh, plus income tax TDS. Contracts running across the rate change need careful invoicing.<\/p>\n<h2 class=\"wp-block-heading\">GST rates for works contracts<\/h2>\n<figure class=\"wp-block-table\">\n<table>\n<thead>\n<tr>\n<th>Contract<\/th>\n<th>GST<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Works contracts for private clients (buildings, interiors, factories)<\/td>\n<td>18%<\/td>\n<\/tr>\n<tr>\n<td>Specified works contracts for government, local authorities and governmental authorities<\/td>\n<td>18% from 22 September 2025 (earlier 12%)<\/td>\n<\/tr>\n<tr>\n<td>Pure services (no goods) to a municipality or panchayat for their functions<\/td>\n<td>Exempt<\/td>\n<\/tr>\n<tr>\n<td>Construction of residential flats for sale by a developer<\/td>\n<td>Separate real estate rates (1% or 5% without credit); see <a href=\"https:\/\/www.taxaj.com\/learn\/gst-on-flat-purchase-kolkata-under-construction\/\" target=\"_blank\" rel=\"noopener\">GST on flats in Kolkata<\/a><\/td>\n<\/tr>\n<tr>\n<td>Sub-contractors<\/td>\n<td>Same rate as the main contract category in many cases; check the entry<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n<h2 class=\"wp-block-heading\">Contracts running across 22 September 2025<\/h2>\n<p class=\"wp-block-paragraph\">The rate depends on the time of supply rules. Work completed and invoiced before 22 September 2025 carries the old rate. For invoices raised or payments received after that date, the new rate generally applies unless the work was completed and either the invoice or payment preceded the change. Review contract escalation clauses: many government contracts allow revision for change in tax rates. Write to the department with the calculation.<\/p>\n<h2 class=\"wp-block-heading\">Input tax credit<\/h2>\n<ul class=\"wp-block-list\">\n<li><strong>For the contractor:<\/strong> credit on materials, sub-contracts and services is available against output tax.<\/li>\n<li><strong>For the client:<\/strong> credit on works contracts for construction of immovable property (other than plant and machinery) is blocked. The Finance Act 2025 amended the law with retrospective effect to restrict the &#8220;plant or machinery&#8221; reading that the Supreme Court had allowed in 2024, so buildings, sheds and civil structures generally remain blocked.<\/li>\n<\/ul>\n<h2 class=\"wp-block-heading\">GST TDS by government and public bodies<\/h2>\n<p class=\"wp-block-paragraph\">Departments, local authorities, governmental agencies and specified public sector bodies deduct 2% GST TDS (1% CGST plus 1% SGST, or 2% IGST) on payments to contractors where the contract value exceeds \u20b92.5 lakh. Accept the credit on the portal every month to use it.<\/p>\n<h2 class=\"wp-block-heading\">Income tax TDS and other points<\/h2>\n<ul class=\"wp-block-list\">\n<li>TDS under the contracts provision at 1% (individual or HUF contractors) or 2% (others) on payments above thresholds.<\/li>\n<li>Labour cess and royalty on materials as per contract terms.<\/li>\n<li>Retention money and mobilisation advances: GST is payable when invoiced or received, so plan cash flow.<\/li>\n<\/ul>\n<h2 class=\"wp-block-heading\">Registration and compliance<\/h2>\n<ul class=\"wp-block-list\">\n<li>Take GST registration in West Bengal; projects in other states need registration there.<\/li>\n<li>E-invoicing if aggregate turnover exceeds \u20b95 crore. See <a href=\"https:\/\/www.taxaj.com\/learn\/e-invoicing-kolkata-businesses-gst-irn-30-day-rule\/\" target=\"_blank\" rel=\"noopener\">e-invoicing for Kolkata businesses<\/a>.<\/li>\n<li>Keep running account bills, measurement books and completion certificates with each invoice.<\/li>\n<\/ul>\n<h2 class=\"wp-block-heading\">Example: a KMC road contract across the rate change<\/h2>\n<p class=\"wp-block-paragraph\">A contractor signed a \u20b93 crore road resurfacing contract with a municipal body in May 2025 at 12% GST. By 21 September 2025, it had completed and billed \u20b91.8 crore. Work done after that was billed at 18%, as both completion and invoicing fell after the change. The contract had a clause allowing revision for change in taxes, so the contractor wrote to the department with the calculation of the additional 6% on the balance \u20b91.2 crore and attached the notification, getting the revised rate approved.<\/p>\n<h2 class=\"wp-block-heading\">Sub-contractors in government projects<\/h2>\n<p class=\"wp-block-paragraph\">Sub-contractors working under main contractors on government projects should check whether their services fall in the same specified category or the general 18% entry. Since both are now mostly 18%, the rate difference has narrowed, but the description on invoices and the main contract still matter for audits.<\/p>\n<h2 class=\"wp-block-heading\">Documentation for running bills<\/h2>\n<ul class=\"wp-block-list\">\n<li>Running account bills with measurement details.<\/li>\n<li>GST invoice for each bill with the correct rate and place of supply.<\/li>\n<li>TDS certificates from the department (GST TDS in GSTR-7 data and income tax TDS in Form 26AS).<\/li>\n<li>Reconciliation of retention money and security deposits.<\/li>\n<\/ul>\n<h2 class=\"wp-block-heading\">Private projects<\/h2>\n<p class=\"wp-block-paragraph\">For factories, hospitals, schools and commercial buildings for private clients in Kolkata, works contracts are at 18%. Clients cannot claim credit for construction of buildings, but can for plant and machinery installed (excluding civil foundations and structures beyond the definition). Separate invoices for machinery supply and installation from civil work help the client.<\/p>\n<h2 class=\"wp-block-heading\">Quick checklist for contractors<\/h2>\n<ol class=\"wp-block-list\">\n<li>Apply the correct rate by contract type and date.<\/li>\n<li>Claim rate-change escalation where the contract allows.<\/li>\n<li>Accept GST TDS credits monthly.<\/li>\n<li>Reconcile Form 26AS income tax TDS.<\/li>\n<li>Keep running bills and measurement books.<\/li>\n<\/ol>\n<h2 class=\"wp-block-heading\">FAQs<\/h2>\n<h3 class=\"wp-block-heading\">What is the GST rate on government works contracts in 2026?<\/h3>\n<p class=\"wp-block-paragraph\">18%, from 22 September 2025, for specified works contracts that were earlier at 12%.<\/p>\n<h3 class=\"wp-block-heading\">Is GST charged on pure labour work for KMC?<\/h3>\n<p class=\"wp-block-paragraph\">Pure services without goods for functions of a municipality are exempt.<\/p>\n<h3 class=\"wp-block-heading\">Can a company claim GST credit on construction of its office building?<\/h3>\n<p class=\"wp-block-paragraph\">Generally no; credit on construction of immovable property is blocked.<\/p>\n<h3 class=\"wp-block-heading\">Does the 2% GST TDS reduce the contractor&#8217;s GST?<\/h3>\n<p class=\"wp-block-paragraph\">It is credited to the contractor&#8217;s cash ledger and can be used to pay GST, so it is an advance payment, not an extra tax.<\/p>\n<h3 class=\"wp-block-heading\">Is GST payable on retention money?<\/h3>\n<p class=\"wp-block-paragraph\">GST is payable when the invoice is issued or payment is received, whichever is earlier, including on retention amounts invoiced.<\/p>\n<p class=\"wp-block-paragraph\">TAXAJ handles GST, TDS reconciliation, escalation claims and accounts for contractors in Kolkata. See our <a href=\"https:\/\/www.taxaj.com\/gst-returns\" target=\"_blank\" rel=\"noopener\">GST return filing service<\/a> or talk to our <a href=\"https:\/\/www.taxaj.com\/ca-in-kolkata\" target=\"_blank\" rel=\"noopener\">Kolkata team<\/a>.<\/p>\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/wa.me\/918802912345?text=I%20am%20a%20contractor%20in%20Kolkata%20and%20need%20GST%20help\" target=\"_blank\" rel=\"noopener\">WhatsApp our Kolkata team<\/a><\/div>\n<div class=\"wp-block-button is-style-outline\"><a class=\"wp-block-button__link wp-element-button\" href=\"tel:+918802812345\">Call 88028 12345<\/a><\/div>\n<\/div>\n<p class=\"has-small-font-size wp-block-paragraph\"><em>Last updated 11 November 2026. Sources: Notification 11\/2017 and 12\/2017-Central Tax (Rate) as amended, including the September 2025 rate changes for specified works contracts; CGST Act, 2017, sections 14, 17(5) (as amended by the Finance Act, 2025) and 51; Income-tax law on TDS on contracts. General information only.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>For civil, electrical and building contractors working for KMC, KMDA, PWD, railways and private clients in Kolkata: the move of specified government works contracts from 12% to 18% from 22 September 2025, exemptions for pure services to local bodies, the bar on input tax credit for buildings, 2% GST TDS by government, income tax TDS, and contracts running across the rate change.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[974],"tags":[],"class_list":["post-91097","post","type-post","status-publish","format-standard","hentry","category-gst"],"_links":{"self":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/91097","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/comments?post=91097"}],"version-history":[{"count":1,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/91097\/revisions"}],"predecessor-version":[{"id":92214,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/91097\/revisions\/92214"}],"wp:attachment":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/media?parent=91097"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/categories?post=91097"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/tags?post=91097"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}