Does LAD in construction need/need not to impose GST?
We are s sub-contractor, We have now received a Sub-contractor Certificate of payment from the main contractor on 20 Oct 2018 which the job already completed on 30 Dec 2017. Please advise us how to issue tax invoice ?
e.g. Cert 16(final) this cert amt : 100,000.00
Less: LAD : (30,000.00)
Total amt to date : 70,000.00
6% gst : 4,200.00
Total amt incl gst : 74,200.00
Rectification of defect is one of the provisions in the construction contract. It is allowed even after the issuance of Certificate of Practical Completion (CPC) or after the purchaser has taken the possession of the property. Under the contract, the contractor is liable to rectify the defects that appear between the period of CPC is issued and the expiry of the Defect Liability Period (DLP). Hence, such rectification of defect is compensatory in nature, and cannot be treated as taxable supplies.
However, if the contractor fails to rectify the defects and another contractor is hired by the client to rectify the poor workmanship done, the additional cost incurred may be subjected to GST. If the second contractor is a GST registered person, he will charge GST to the client on the work done. The client will in return recharge the amount (with or without margin added) to the first contractor by deducting the charges from any payment due to the first contractor and this amount is also subjected to GST.
The developer (“D”) hires another sub-contractor (“SC”) to do the rectification. As such, the sub-contractor (“SC”) is supplying his construction services to (“D”). If the sub-contractor (“SC”) is registered for GST, he has to charge (“D”) GST on the rectification works performed. (“D”) then makes the onward supply of the construction services to the main contractor (“MC”). (“D”) has to charge (“MC”) GST on the said works.
But now it is in the SST era and I would suggest you consult the Officer at the Customs on this matter.