504/2025-2026

Aizawl the 10th February, 2026 : It has been observed that there is a prevailing misconception among various Government Departments that GST payment is not required when works are executed without engaging a Contractor (Departmental Works). Due to this, a significant amount of Government Revenue is being lost.

As this is against the law, the following notification is issued to prevent difficulties for Drawing and Disbursing Officers (DDOs) and Contractors/Suppliers:

1. "Departmental Work" is NOT Exempt from GST Even when a Department executes work on its own without engaging a Contractor (Departmental execution), it is not exempt from GST. (Ref: Finance Department Notification NO. G.17018/1/02-FEC dated 31st January 2025)

Finance Department, Govt. of Mizoram, has stated that whenever any Department executes Departmental Work without a contractor, they must pay the applicable GST on all procurement of required materials (Cement, Rod, etc.). Departments executing Departmental Works must not purchase materials from Dealers/Shops that do not have GST registration. All materials for Government works must be purchased only from GST Registered Dealers, and a Tax Invoice must be obtained.

2. The "GST Component" in Work Order/Sanctioned Fund It is important for the public and Government employees to know that funds sanctioned for Government works (Road construction, Building construction, etc.) are prepared based on the Schedule of Rates (SOR). In the SOR estimate, besides the material/labor cost, the GST to be deposited to the Government is already included.

This "GST Component" is Government Revenue, and it must not be diverted for the work itself. If a Department or Contractor retains this GST amount without depositing it to the Government, or diverts it for the execution of work, it shall be treated as misappropriation of public funds.

3. TDS (Tax Deducted at Source) Must Be Deducted Based on Section 51 of the Central/Mizoram GST Act, 2017:

Who must deduct: All Government Departments, Local Authorities, and Agencies.
When: If the Contract or supply estimated amount exceeds 2.5 Lakhs.
Rate: 2% (1% SGST + 1% CGST) must be deducted from the Bill and deposited to the Government.

4. Penalties for Defaulters Those who fail to comply with this law can be penalized severely under the GST Act:

DDOs: If they fail to deduct TDS, they will be held fully responsible; they will be liable to pay interest and will be imposed a Personal Penalty under Section 122.
Contractors: The 2% TDS (1 % Central / 1 % State) deducted by DDOs from contractor bills is credited to the contractor's GST account. When Contractors receive their bill payment, they receive the GST amount as well. The 2% TDS already deducted enters their account, and along with the GST received in the bill (16%), the total 18% must be deposited to the Government. Failure to deposit this amounts to Tax Evasion and is punishable.
Material Suppliers: Supplying materials to the Government without a GST Invoice is considered Tax Evasion, and they are liable to be punished according to the law.
Audit Objection: Any expenditure of Government funds without proper GST compliance will be raised as an objection in the CAG (Audit) as "Loss to State Exchequer".

Appeal/ Request

To Contractors/Suppliers: Do not supply materials to Government Departments without a GST Bill. If your supply value exceeds 2.5 Lakhs, insist on a 2% TDS Certificate (Form GSTR-7A) from the ODO. Also, be aware that since GST is included in your Government Works Contract or supply of goods, it is your sole responsibility to return/deposit it into the Government exchequer.
To Departmental Officers: If you execute work by engaging a Works Contractor, you must deduct 2% TDS if the bill exceeds 2.5 Lakhs. Even if you execute work departmentally without engaging a contractor, since GST is calculated and included in the sanctioned sum, you must purchase the required materials for the work from GST registered dealers, paying the GST component, and you must obtain a Tax Invoice from such dealers.