RA Bill Calculator — Retention, GST & TDS

Retention — usually 5% of every RA bill — is money the client holds back from what the contractor has earned, as security. It is not a penalty and it is not the client’s to keep: it is a guarantee fund against the defect liability period, the window (commonly 12 months after completion) during which the contractor must return and fix anything that fails — cracked plaster, a leaking chajja, a sunk floor, honeycombed concrete that shows up under load.

If the contractor fixes defects promptly, the retention is released — typically half on practical completion and the balance at the end of the defect liability period. If they walk away, the client uses the retained money to get the defects rectified by someone else. That is the whole logic: retention keeps the contractor financially interested in the building long after the last pour. Because it accumulates bill by bill, a running tally of retention held versus released is one of the numbers a site engineer is expected to have at their fingertips.

A construction contract is a works contract — a contract for carrying out work (building, fabrication, erection) rather than a plain sale of goods. Payments a business makes to a contractor for such work fall under the tax-deduction-at- source net: the payer must deduct a small percentage of the payment as TDS and deposit it against the contractor’s tax account, so the income is captured at the point it is paid rather than left to be declared later.

Under Section 393(1) of the Income-tax Act 2025, Table Sl. No. 6(i) — the row for payments to contractors for carrying out work — the rate on a works payment sits at 1–2%, which is why this tool defaults to 1% and bounds the field to that band. Two details matter on site. First, the TDS is computed on the value of the work — the gross bill excluding GST, not on the GST-inclusive figure. Second, TDS is a deduction from the contractor’s payment, whereas GST is an addition the contractor collects and passes to the exchequer — they pull the net payable in opposite directions, which is exactly why both appear on the same bill.

• Assuming a lower “residential” GST. People often carry over a reduced-rate assumption from a specific composite or affordable- housing scheme and apply it to an ordinary works bill. Unless a specific concessional rate genuinely applies to the contract, the works-contract GST is the standard rate — this tool defaults to 18% and never implies a hidden residential discount.
• Computing TDS on the GST-inclusive amount. TDS belongs on the value of the work, i.e. the gross bill excluding GST. Deducting it on gross-plus-GST over-deducts and understates the contractor’s payment.
• Forgetting the advance recovery — or mis-prorating it. A mobilisation or material advance paid up front is recovered in slices across the RA bills, usually pro-rata to work done. Skip the recovery on a bill and you overpay; recover the whole advance in one bill instead of prorating it and you starve the contractor’s cash flow. It is a rupee figure, entered per bill — not a percentage — which is why this calculator takes it as an amount.
• Netting retention against the wrong base. Retention is a percentage of the gross bill value, taken before GST — not of the payable after tax. Applying it to the wrong figure quietly changes what is held back.

Take a clean ₹1,00,000 gross RA bill at the calculator’s defaults: retention 5%, GST 18%, TDS 1%, and no advance being recovered this bill.

Gross bill value    = ₹1,00,000.00
− Retention (5%)   = ₹5,000.00
− Advance recovery = ₹0.00
+ GST (18%)      = ₹18,000.00
− TDS (1%)       = ₹1,000.00
─────────────────────
Net payable     = ₹1,12,000.00

So on ₹1,00,000 of certified work, ₹5,000 is held as retention against the defect liability period, ₹18,000 of GST is added on, ₹1,000 of TDS is deducted against the contractor’s tax, and — with no advance to recover — the contractor is paid ₹1,12,000. Change any rate above and every line, and the net payable, updates live.