GST on Works Contract Compliance Checklist
GST ON WORKS CONTRACT COMPLIANCE CHECKLIST
Entity: {{client_name}} · GSTIN: {{gst_no}} · Financial year ended: {{period_end}}
A. The Section 2(119) definition test
Under GST, "works contract" means ONLY a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any IMMOVABLE PROPERTY, where transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. This is narrower than the pre-GST understanding, which also covered movable-property contracts (e.g. fabrication of machinery) as works contracts — under GST, a similar contract for MOVABLE property is instead treated as a composite supply, not a "works contract" in the defined sense.
B. Immovable vs. movable — the boundary test
- Immovable property generally means land, benefits arising out of land, and things attached to the earth or permanently fastened to anything attached to the earth (buildings, structures) — apply the "permanency and degree of annexation" test where genuinely unclear, not just how the contract is titled.
- A contract to fabricate and install machinery that is bolted down but can be unbolted and relocated without destroying it is typically movable property (a composite supply, not a works contract), whereas embedding structural steel into a building's foundation is immovable.
- Get this classification right FIRST — everything else (GST rate, ITC eligibility under Sec 17(5), RCM applicability) follows from whether the contract is a "works contract" (immovable) or a composite supply of movable-property fabrication.
C. Works contract is always treated as a supply of SERVICE
Once correctly classified as a works contract under Sec 2(119), Schedule II deems the entire transaction (materials + labour combined) a supply of SERVICE, not goods — even though goods clearly form part of it. This avoids the pre-GST dispute over splitting a works contract into a goods component and a services component for tax purposes.
D. RCM on specified works contract services
Reverse charge applies to specified categories of works contract services supplied to specified categories of recipients (e.g. certain government-linked construction services under specified notifications) — verify against the currently notified list rather than assuming RCM applies broadly to all works contracts, since the general position is forward charge unless a specific notification brings a category under RCM.
E. ITC restriction cross-reference
Works contract services for construction of immovable property (other than plant and machinery) are blocked under Section 17(5) for the RECIPIENT claiming ITC — except where the recipient's own output is further supply of works contract service (back-to-back subcontracting). Cross-check this against the entity's own `blocked-credit-17-5-working-paper` if it is a recipient rather than (or in addition to) a supplier of works contract services.
| Test | Result |
|---|
| Immovable vs. movable property boundary correctly tested (not assumed from contract title)? (Y/N) | |
| Correctly classified as works contract (Sec 2(119)) vs. composite supply of movable-property fabrication? (Y/N) | |
| RCM tested against the currently notified specified categories, not assumed broadly? (Y/N) | |
| ITC restriction under Sec 17(5) tested if the entity is a recipient of works contract services? (Y/N) | |
Prepared by: ____________________ Reviewed by: ____________________
Date: 31 July 2026
