Works Contract under GST
This Presentation Contain
 Introduction to GST
 Definition of Works Contract
 Scope of Supply
 Exemptions & Valuation
 Taxability of TDR
 Time of Supply of Service
 Place of Supply
 Registration
 Composition Scheme
 Valuation
 Input Tax Credit
 Payment of Taxes & TDS
 Returns
 Existing Long Term Contracts
 1. Introduction:
The current Indirect tax regime in India provides for a complex tax environment due to
multiplicity of taxes, elaborate compliance obligations and tax cascading. Under the
proposed GST regime, all the key Indirect tax legislations would be subsumed (except for
few taxes such as duty on Electricity, Stamp Duty, etc.).
There has been significant progress on the GST front recently. With the release of the Revised draft
Model GST Law, a major milestone has been achieved and India has certainly moved a step closer to
GST.
Infrastructure projects (including Power) currently enjoy various concessions and
benefits from indirect tax perspective, and it is imperative to evaluate whether these
benefits would continue under the GST regime.

In light of the above developments, Industry would now need to analyze the
provisions of the draft law in detail, and assess its impact on their business. This is
essential to ensure that timely representations are made to the Government, as well as to
identify key implementation requirements as part of the preparations for transition from
the existing indirect tax regime to the GST regime.
In the ensuing paragraphs, we have sought to identify the key aspects of the revised
Model GST Law as may be relevant for the Infrastructure Sector.

Introduction to GST:
Under present indirect tax systems there’re various taxes govern supply of goods and
services which are excise, service tax, VAT, CST, entry tax, etc. Credit of tax paid at one
stage is not available in 2nd stage and therefore this creates double taxation which is born
by ultimate consumer.
Also under this system various compliances and complexity is there like multiple
registrations, complex invoice, documentation, different points for taxations, Differenr
rates of taxes, etc.

To reduce this Burdon and complexity GST is introduced. In India there is Dual model of
GST where both centre and state have power to levy taxes on goods and services. GST will
be leviable on value addition at each stage. On intra-state i.e. within the state supplies of
goods or services CGST (i.e. central goods and service tax which is revenue of central
government) as well as SGST (i.e. State goods and service tax which is revenue of state
government) is leviable. On inter-state supplies IGST i.e. integrated goods and service tax is
leviable which is collected by centre but distributed to state where goods are consumed i.e.
GST is Destination based taxation.

Detail provision of how GST will be work in relation to works contract is given in this
article.
Before we start discussion on how GST will be there for construction industry/
works contract, we have to understand what is works contract under GST
 2. Definition of Works Contract:

Section 2 sub Section (110) defines

- Works contract means a contract
- Wherein transfer of property in goods is involved
- In the execution of such contract
- and includes contract for building, construction, fabrication, completion, erection,
installation, fitting out, improvement, modification, repair, maintenance, renovation,
alteration or commissioning of any immovable property;

What is not works contract:

1. The contract that is merely for supply of goods is not a works contract. Like supply
of material only for construction is pure supply of goods which attracts provision of
supply of goods
2. The contract that is merely for supply of labor is also not works contract which
attract provision of supply of service. Therefore Architect who only provides design
for construction is not works contract.

Action to be taken:
 Identify component involve in your business and communicate with professionals to make
sure whether you cover under works contract or not.

3. Scope of Supply:
Problem under Existing Law:
Currently, both VAT and Service tax is applicable on works contract service activities. This
has not only resulted in higher tax burden but also in numerous litigations for
infrastructure projects on the issue of whether different contracts have to be treated as
‘supply of goods’ or ‘provision of service’ contracts, or could they be treated as a composite
works contract involving supply of both goods and services.

Provision under Model GST law:

Under GST this ambiguity has been comes to an end and now schedule II of Act specifies
that works contract is treated as supply of service. Works contract under Schedule II entry
no. 5 has been divided into two clauses which is explained here under:

Clause (b)
“Construction of a complex, building, civil structure or a part thereof, including a complex
or building intended for sale to a buyer, wholly or partly, except where the entire
consideration has been received after issuance of completion certificate, where required,
by the competent authority or before its first occupation, whichever is earlier.”
 Analysis
Above entry cover works contract in relation to civil construction. Works contracts in
relation to building, complex or any civil structure is treated as supply of service if it is sold
before completion of construction.

However if entire consideration on works contract has been received after issuance of
completion certificate, where required, by the competent authority or before its first
occupation, whichever is earlier than no GST is leviable on such supply as this become
immovable property and GST can’t be levied on sale of immovable property.

Clause (f)
Works contract including transfer of property in goods (whether as goods or in some other
form) involved in the execution of a works contract;

Analysis
This entry covers works contract where transfer of property in goods is involve and also
services are involve in the execution of works contract. It is not necessary that goods
should be transfer in the same form; it may be transfer in some other form.

E.g. in case of works contract of installation of machinery require some material to fix the
machinery and bring it into workable property of this goods is transferred to factory
owner.

In both the clause works contract is treated as service so now there will be no confusion
remain about this; and thus will discuss provision only in relation to service now.

Scope of Supply can be summaries as follow:

Works contract

Works Contract which Works Contract which

Involve civil construction Does not involve civil
construction

Supply after Supply before

Completion of Completion of It is supply
construction construction of service

It is sale of It is supply
GST Leviable
Immovable of service
property

NO GST GST Leviable

Action to be taken:
 Ascertain under which case your business covers i.e.
o Sale of property before completion of construction
o Sale of property after completion of construction
o Other works contract
 It is very important to ascertain scope of supply because all the provisions will be very on that

4. Exemptions & valuation:

Provision under Existing Law:
Exemptions:
Currently there are various abatements or exemptions have been provided under both
service tax act as well as state VAT act.

In service tax various exemptions & abatement has been provided which are:
1. Exemption as per Service Tax Mega Exemption Notification No.25/2012 entry no.
12, 12A, 13, 14, 14A in relation to specified construction services provided to
specified persons
2. Abatement of 75% has been provided in abatement notification 26/2012 to
construction of complex, building, civil structure where value of land is included in
the transaction value.
3. Under Rule 2A of Valuation Rule deduction in transaction value is provided in case
of works contract as follow:
a. 40% of Transaction value in case of new original work
b. 70% of transaction value in case of old work.

In Maharashtra VAT Act there are various methods and composition scheme has been
provided which are:
1. Composition Scheme under section 42(3)
2. Actual expense method under Rule no. 58
3. Standard deduction method under Rule no. 58
4. Composition Scheme under section 42(3A)

Valuation:

Under existing Tax structure valuation under both Service tax act and VAT act are different.
Therefore valuation rules for both the act has to be understand also for different scheme
under both the act different valuation rule given. This creates unnecessary ambiguity in the
law.
Provision under Model GST Law:
Exemptions:
Under model law presently there is no abatement or exemption has been provided in
relation to works contract.

Valuation:
Section 15 governs provision related to Valuation which is given as under:
Value of supply of goods/or services shall be the transaction value i.e. price actually
paid/payable if following condition satisfied:
- Transaction has definite consideration i.e. it is not depend upon some future event.
- Supplier and recipient are not related person
- Price is sole consideration i.e. not a barter exchange

Value of taxable supplies i.e. transaction value also includes following

Clause Provision example
a. Liability of supplier paid by recipient Architecture fees payable by
supplier is paid by recipient and
which is not included in
transaction value
b. Goods supplied by recipient free of cost of Cement supplied by recipient
at reduced price free of cost which is used in the
construction.
c. Royalties or license fees or taxes other than Fees for obtaining sanction map
GST payable by supplier in relation to paid by recipient
contract paid by recipient
d. incidental expenses, such as, commission Transportation charges for
and packing, charged by the supplier to the delivery of machine separately
recipient of a supply on or before delivery charge by supplier which is not
of goods and which is not included in included in the contract of
contract value assembling machinery

There is no specific valuation provision has been given so far as works contract is concern;
so as of now even value of land is also form part of transaction value on which GST at the
standard rate (may be 6% or 12%) is leviable.

Action to be taken:
 Before commencing new projects assess possible impact on agreements and prices of
property should be consider if no deduction is provided under GST
 Review of existing contract and consider impact on prices of the property because of
land value being included in aggregate consideration for taxability purpose.
Representation by us:
Considering Existing provision under VAT & service tax Act it is our request that:
1. Exemptions as given in Mega exemption notification under service tax in relation to
specified construction services to specified person should be continued under GST.
2. Composition Scheme similar to MVAT Composition Scheme under section 42(3A) or
Abatement as provided in entry no. 12 of abatement notification 26/2012 of service
tax should continued to be provided in GST for construction of building or complex
where value of Land is included in transaction Value.
3. Specific Valuation rule for works contract services should be provided for bring
more clarity in valuation rules.

5. Taxability of TDR
It is a common practice for the landowner to transfer development rights in the land to the
developer. In lieu of such rights, the developer may provide a fixed quantity of flats to the
landowner or share in the revenue from sale of the flats.

The Model GST Law defines ‘supply’ in very wide terms, which also includes barter/
exchange of goods or services

Ambiguity remains regarding taxability of such TDR as to whether the same are liable to
tax, and at what value.
Action to be taken:
 Consider impact of taxability of development right on your upcoming contracts.

Representation by us:
1. If TDR is taxable, time of supply, the valuation of transfer of the development rights
by the landowner to the developer, as well as credit eligibility of the developer
needs to be clearly provided for in the GST law. If the current credit provisions
remain, the developer may not be entitled to avail credit of GST paid on TDR, hence
resulting in huge incremental cost.

6. Time of Supply of service:

The liability to pay CGST / SGST on the goods/ services shall arise at the time of supply. As
per section 13 sub section (2):

Time of Supply of Service in case of Normal Charge:

- The date of issue of invoice by the supplier or last date on which he is require to
issue invoice or
- the date of receipt of payment,
- whichever is earlier
 7. Place of Supply

Place of Provision of service is very important as it will decide under whose jurisdiction
particular service will come also to know whether particular supply is inter-state supply or
intra-state supply.

Place of supply of service in relation to Immovable Property

Section 9(4) of IGST Act deals with the place of provision of service in relation works
contract of construction of immovable property which provides:
Place of provision of service in relation to immovable property will be the place of
provision where the immovable property is situated which includes services of:
- Architects
- interior decorators
- surveyors
- engineers and
- other related experts or estate agents
- for carrying out or co-ordination of construction work

However where the immovable property is located in more than one State, the supply of
service shall be treated as made in each of the States in proportion to the value for services
separately collected or determined, in terms of the contract or agreement entered into in
this regard or, in the absence of such contract or agreement, on such other reasonable basis
as may be prescribed in this behalf.

Place of supply in relation to other than Immovable Property:

In the case of works contract services provided other than in relation to immovable
property section 6(2) provides place of provision of services as follow:
- If service is provided to registered taxable person
o Place of provision shall be location of service recipient.
- Where services provided to person other than a registered person
o Place of provision shall be
 The location of the recipient where the address on record exists, and
 The location of the supplier of services in other cases.
 This can be summarized as follow:
Place of provision of service

Place of Provision
of service In
relation to

Immovable other than

property Immovable property

If services provided to I f services provided to

POP - registered taxable other than registered
where immovable person taxable person
property is situated
POP- If address of If address of
location of recipient is avaialble recipient is not
service reciver on records available on records

POP- POP-
location of service location of
reciver service provider

Action to be taken:
 Indentify contracts where services are require
required to provide from different states
state which
need to take different registration in each state to comply with GST requirements.

8. Registration:
Problem under Existing Law:
Under existing condition as works contract covered under both service tax act as well as
VAT act. Therefore registration n under both the act is required
required.. Also if person has business
in more than one state than he has to take registration under all the state as VAT act is
different for each state. This increases unnecessary compliance cost of works contractor.

Therefore
herefore if DLF has construction site in Maharashtra state Gujarat state and Delhi than
DLF has to obtained registration under service tax act as well as VAT act under all the three
states.
However there is option for taking centralize registration under service tax act which
somewhat reduce compliance for registration.
Provision under Model GST law:
Under model GST section 19 deals with registration which is given as follow:

Section 19 sub section (1)-

- Every person who is liable to be registered under Schedule III of this Act
- shall apply for registration in every such State in which he is so liable
- within thirty days from the date on which he becomes liable to registration
- in such manner and subject to such conditions as may be prescribed

Schedule III entry 1:

- Every supplier shall be liable to be registered under this Act
- in the State from Where he makes a taxable supply of goods and/or services
- if his aggregate turnover in a financial year exceeds Rs. 20.00 Lakh

Analysis
Section 23 read with schedule V provide liability of registration to a person whose annual
turnover exceeds Rs. 20.00 Lakh in a financial year. It also provide that taxable person has
to apply for registration in every state in which he is liable to registered i.e. in every state
where he provide taxable supplies and has fixed place of business over there.
This will again leads to multiple registrations same as in existing law.

However where there are occasional taxable supplies in other state than instead of taking
normal registration taxable person has to take casual Registration which is explain as
below:

What is Casual taxable person?

Section 2 subsection (20) defines: “casual taxable person” means

- a person who occasionally undertakes transactions
- involving supply of goods and/or services in the course or furtherance of business
- whether as principal, agent or in any other capacity
- in a taxable territory where he has no fixed place of business;

Analysis
Casual taxable person is person who supplies goods or services in another state where he
does not have any fixed place of business.

So, if a engineer/architecture/ designer, etc of Maharashtra went to Gujarat for providing

services and he does not have any fixed place of business over there than he has to take
registration in Gujarat as causal taxable person.
 How to obtained registration as casual Taxable person?

- Casual Taxable person has compulsory to obtained registration whether or not it

exceed threshold limit of Rs.20.00 Lakh
- Casual taxable person has to apply for registration before providing taxable
supplies.
- Along with application he has to make an advance deposit of tax of an amount
equivalent to the estimated tax liability for the period for which the registration is
sought i.e. prepaid tax system
- On application, certificate of registration is provided which is valid only for 90 days
from the effective date of registration.
- However proper officer may, at the request of the said taxable person, extend the
aforesaid period of ninety days by a further period not exceeding ninety days after
deposit of an additional amount of tax equivalent to the estimated tax liability for
the period for which the extension is sought.

Action to be taken:
 Identify states where registration is now require to you and ensure required documents
will be available with you before implementation of GST.

Representation by us:
Provision of section 19 leads to obtained registration in every states where there is fixed
place of business and has to obtained registration as casual taxable person in the state
where he does not have any fixed place of business.
This will unnecessarily increases compliance for service provider by obtaining multiple
registrations.
Also provision of casual taxable person will leads to unbalanced input tax credit to them
like it may be possible he has excess input tax credit in Maharashtra state however he can’t
use this credit while paying liability as a casual taxable person in Gujarat state.

It is our suggestion to provide system of centralized registration at least for service

providers so that there will be smooth flow of credit in all the state and they are free to
provide services in all states and there will be same platform all over India.

9. Composition Scheme:
Problem Under existing Law:
Under existing Maharashtra VAT Act there is composition scheme for works contract under
section 42 (3A) where 1% Vat is require to be paid on agreement value or value adopted by
stamp duty authority for payment of stamp duty whichever is higher i.e. land component is
also involved in agreement value on which tax as to be paid.
There is abatement given under service tax law in which builder has to pay service tax only
on 25% of value where agreement value includes value of Land.
Provision under Model GST law:
Under Model GST law composition scheme is not applicable to service provider.
Provision of composition scheme is given under section 9 which is as follow:

- A registered taxable person, whose aggregate turnover in a financial year does not
exceed Rs.50.00
- Is permitted to pay, in lieu of the tax payable by him,
- an amount calculated at such rate as may be prescribed, but not less than one
percent of the turnover during the year

Conditions:-
- inter-State supplies of goods and/or services are not permitted
- Turnover will be turnover of all business in all states under single PAN
- shall not collect any tax from the recipient on supplies made by him
- he is not entitled to any input tax credit
Rate:-
- In case of Manufacturer @ 2.5%
- In case of Traders @ 1%
- Not Applicable to service Provider

Analysis:
Only taxable persons whose ‘aggregate turnover’ does not exceed Rs. 50 Lakh in a financial
year will be eligible to opt for payment of tax under the composition scheme. Turnover
here means total of taxable supplies, non taxable supplies and also exempted supplies all
over India.
Also scheme is not applicable to service Provider i.e. works contractor can’t opt for
composition scheme.

Representation by us:
If we consider point of view of works contractor, Works contract is classified as service
under Schedule III also generally where civil construction is involved value of taxable
supplies are higher than Rs. 50.00 Lakh and thus this will exclude many works contractor
for opting composition scheme.

It is our suggestion to provide separate composition scheme for works contractors. Scheme
should also specify what will be treatment of value of land included in the agreement value
for the purpose of calculating limit for opting composition scheme.
 10. Input Tax Credit
Problem in existing law:
There are various inputs of goods and services in works contract which become major part
of value of supply like; under works contract related to construction of building; cement
and iron bar become the major portion of value of supply. On this input excise is levied but
works contractor/ builders can’t use this credit.

Also under VAT act there is different option to discharge tax liability where credit of VAT
paid on inputs is available subject to certain retention and therefore some or full value of
VAT become cost for works contractor.

Similarly in case of service tax: In case of abatement of 75% where applicable is opted for
payment of service tax or in case of services tax is paid on 40%/70% of value of service as
per valuation rule under both situation Credit of taxes paid on inputs used in providing
services is not available

Hence this all tax paid by works contractor become cost to him which breaks the chain of
Input tax credit.

Provision under Model GST law:

As per section 17 sub section 4 clause (c) and clause (d) input tax credit of works contract
service received will not be available if used for construction of immovable property(other
than plant & machinery). However credit will be available if such service used for providing
further works contract service (i.e. sub-contract).

Similarly input tax credit on goods or services received by a taxable person for construction
of immovable property (other than Plant & Machinery) on his own account, even when
used in course or furtherance of business like renting, Commercial Complex, hotel, hostel,
etc will not be available.
This provision can be summaries as:

Works Contract

Resulted in Immovable Resulted in movable

property Other than property
plant & machinery

Input Tax credit not Input Tax credit not

available available
Transitional Provision of Input Tax credit:
Transition provision is explain here considering GST will be applicable from 1 st of
April 2017

Credit C/F in Return:

In case of person registered under existing law i.e. VAT/service tax/ excise have
excess input tax credit carried forward in return filed for 31st march 2017 than he can
carried forward this credit into GST.

- As per section 167

- Amount of CENVAT credit or VAT Credit
- Input tax credit as per VAT law,
- carried forward in a return furnished under earlier law
- in respect of period ending immediately preceding the date of applicability of GST
- can be taken as credit of GST in the following manner
o Credit of VAT as SGST
o Credit of service tax or excise as CGST

Credit on Capital Goods not carried forward in Return

In case of excise and service tax credit of capital goods purchase during the year is
available in two installments, 50% in the year of purchase and 50% in any subsequent year.
Therefore in case capital goods purchase in year 2016-17, 50% credit can be taken in the
year 2016-17 itself, to avail remaining 50% of credit section 168 is provided as follow:
- As per section 168
- A registered taxable person shall be entitle to take input tax credit of
- Un-availed CENVAT credit on capital goods, not carried forward in a return,
- furnished under the earlier law by him
- for the period ending with the day immediately preceding the date of applicability of
GST

Credit of inputs held in stock not carried in return

There are inputs as on 31st March 2017 on which excise or VAT has been paid on purchase
of but credit of this input is not taken as taxable person is not liable to registered under old
law (like turnover below Rs. 150.00 Lakh) or he is dealing in exempted goods only or he is
paying taxes under composition scheme but now this goods are liable to tax under GST law.
So on sale of this stock GST will require to be paid. Therefore to avoid double taxation on
this goods, credit of duty paid on stock purchase should be made available for which
provision is given under section 169 and 170 as follow:
- In case of person who is not liable to register under earlier law (like Trader or or
service provider providing Exempted service)
- or who was engaged in the manufacture of exempted goods under the earlier law
- or who is paying taxes under composition scheme in earlier law
- but which are liable to tax under this Act,
 - shall be entitled to take credit of taxes in respect of inputs held in stock provided:
o Such inputs and / or goods are used or intended to be used for making taxable
supplies under GST
o The said taxable person was eligible for CENVAT credit/VAT credit on receipt of
such inputs and/or goods under the earlier law but for his not being liable for
registration or the goods remaining exempt under the said law
o The said taxable person is eligible for input tax credit under GST i.e. not cover
under composition scheme or turnover is not below Rs.20.00 Lakh
o The said taxable person is in possession of invoice in respect of such material
not older than twelve month which clearly mention amount of tax paid by him.

Action to be taken:
 Identify components involved in your supply and decided whether it is beneficial to opt for
normal scheme and take the benefit of Input tax credit or opt for composition scheme under
GST.
 Books of Account should be completed well before time in proper manner (Currently
various credit may not be recorded) so that credit can be carried forward into GST by filing
return under existing law on time.
 Plan your purchase of capitals goods directly from manufacturer so that you can get credit
of taxed paid on it which is not available under earlier law.
 Plan your maximum purchase from manufacturer where you can get excisable invoice so
that you can take the benefit of excise paid in respect of stock held on the date of
applicability of GST.
 If you are planning to shift GST from normal scheme under existing law to composition
scheme under GST; Plan your purchase in such way that liability to pay in respect of stock
held on the day of conversion will be minimum.

Representation by us:
1. Input Tax credit on works contract resulted into immovable property
There are various components are involved in the execution of works contract in relation
to civil construction like:

Services Inputs
1. Engineers 1. Cement
2. Surveyor 2. Iron bars
3. Advocates 3. Sand
4. Builder 4. Aggregates
5. Designer 5. Pipe fitting
6. Architecture 6. Bricks
7. Sub contractor 7. Gravel (murum), etc
8. Man power supplier, etc
As per model GST law input tax credit on this inputs as well as input service can’t be taken
where this input used in construction of immovable property other than plant and
machinery even used for furtherance of business.

This provision will block the credit of all components as mention above. This will also
break the chain of Input Tax credit. This will ultimately again comes to existing
VAT/service tax flaw.

This break of chain will leads contractors or factory owner undertaking construction to
purchase from unregistered dealers all the main inputs involve in the construction mainly
Cement & Iron bars which is major portion of input. Also they will prefer services involved
in the execution of construction from the unregister service provider or not to take
invoices.

This whole thing will result in creation of black money which adversely affect to our
economy.
As infrastructure is very necessary for any manufacturer or dealer to start or develop there
business. Blockage of credit will increase cost of their infrastructure by amount of tax paid
by them which will form nearly about 10-15% of their total project cost.

It is our suggestion to make illegible credit of this input to registered taxable person who
can use this credit for his taxable supplies. This will reduce their cost of immovable
property and thus they will promote to invest in factory building and like infrastructure
cost to develop and expand their business, an off course this will also develop our economy.

If this credit has been provided to them they will always prefer to purchase from registered
dealer instead of purchasing unregister dealer. This will helps to curb transaction through
unregistered dealer and also to reduce black money which is also one of the objects of
introduction of GST.

2. Input Tax credit on Administrative Expenses

As per Section As per Section 17 sub-section 4 clause (a) & (b) credit will not
be available on

a. motor vehicles and other conveyance purchase except when they are used for
making the following taxable supplies, namely
- further supply of such vehicles or conveyances ; or
- transportation of passengers; or
- imparting training on driving, flying, navigating such vehicles or conveyances;
- For transportation of goods.
 b. Input goods or service when used for ,
- food and beverages, outdoor catering, beauty treatment, health services, cosmetic
and plastic surgery except where such inward supply of goods or services of a
particular category is used by a registered taxable person for making an outward
taxable supply of the same category of goods or services;
- membership of a club, health and fitness centre,
- rent-a-cab, life insurance, health insurance except where the Government notifies
the services which are obligatory for an employer to provide to its employees under
any law for the time being in force; and
- Travel benefits extended to employees on vacation such as leave or home travel
concession.
This in-illegibility of input tax credit will restrict Taxable supplier to provide
attractive service to employees and only paying higher package to them. This will
lower administrative expenses of organization and will restrict development of
standard of living of employee i.e. youth of employees.

It is our request to provide smooth flow of credit on all the expense incurred by
taxable person for his business whether it is used for development of employee or
not as development of employee is development of organization.

3. Transition provision in respect of inputs held in stock:

As per section 169 & 170 a registered taxable person can take credit of inputs held in
stock as on date of applicability of GST.
It is not specifically clear whether in case of trader credit of Excise paid on purchase of
goods held in stock as on appointed date will be available or not.

It is our request to provide whether section 169 is applicable to Traders or not.

4. Transition provision for Credit of Input service used:

As per section 169 credit of inputs held in stock is available if person is not liable to
register under existing law or manufacturer manufacturing exempted product under
existing law but liable to register under GST law.

However provision is not applicable for services received before appointed date for
which taxable supplies is to be made after appointed date on which GST is leviable.

It is our suggestion that credit should be available of service tax paid on such input
service received on or before applicability of GST but output service for which has been
provided after applicability of GST and on which GST is payable.

5. Transitional Provision of Input Tax credit on capital Goods:

As per section 168, input tax credit which is not carried forward in return as per earlier
law can be availed under GST only if he is eligible to take such credit.
However let suppose a taxable person is not eligible to take credit on Machine (capital
goods) purchase in the year 2016-17 because manufacturer manufacturing exempted
goods or his turnover is below taxable limit of Rs. 150.00 Lakh.
 But now this machine (capital Goods) will produce taxable goods under GST. Therefore
he should be eligible to take credit of Taxes paid on such capital goods.

In the case manufacturer is not getting credit as he is not registered because his
aggregate turnover does not exceed limit of Rs. 150.00 Lakh than in such case
manufacturers will unnecessarily rush into getting voluntary registration in the month
of March so that they will get the credit of this input paid on purchase of capital goods.
However in case of dealers of works contractor they can’t take registration under Excise
so in any case they will not be able to take credit of excise duty paid by them in the
purchase of capital goods which they will use in providing taxable supplies under GST.

So it is our suggestion that credit of Excise duty paid on capital goods purchase during
last 1 or 2 year should be made available to taxable person who is making taxable
supplies out of such capital goods whether or not he is eligible to take registration
under Excise Act.

11. Long term construction / works contracts

Contract made earlier now liable to GST
- As per section 186
- The goods and/or services supplied on or after the applicability of GST
- in pursuance of a contract entered into prior to the application of GST
- shall be liable to tax under the provisions of GST Act
- irrespective of any terms and condition given under contract

Service provided after applicability of GST But payment has been

received before applicability of GST
- As per section 187
- no tax shall be payable on the supply of goods and/or services
- made on or after the applicability of GST
- if the consideration for the said supply has been received prior to the applicability of
GST and
- the duty or tax payable thereon has already been paid under the earlier law

Service provided before applicability of GST but payment received after

applicability of GST
Section 188 This Section applies in the following situations:
- Where the supply of goods and / or services was made prior to the introduction of
GST and
- Where full tax / duty payable is paid under the earlier law; and
- Where a part of the amount (referred to as retention amounts) is paid after the
introduction of GST.
- Than no tax is require to be paid under GST
Deduction of tax source under earlier Law
- As per section 196
- Where the supplier had sold any goods under the earlier law; and
- TDS applies on such transactions; and
- the supplier had issued the invoice before the introduction of GST and
- the payment is made to the supplier after the date of introduction of GST
- no tax would be deductible at the time of making payment to the supplier.
Action to be Taken:

 Review of existing Contract with customers well as contractors/ vendors to analyze

impact of change in taxability of works contract- tax clause and change inn law
clause to be analyzed
 Future Contracts to be framed in light proposed GST provision for tax optimization.
 Structure point of taxation of your transaction near to transition period in such
manner to take benefit out of that like if GST have negative impact on transaction
than receive consideration earlier even for supplies to be undertaken post GST and
deferred payment if it has favorable impact of GST.

Simplifying Transitional issue:

Contract Service GST will

Made before provide after be
apl. of GST appl. of GST leviable

Service Payment GST will

Provided After recieved
before appl of
not be
App. GST
GST leviable

Service GST will

Payment
Provided before
recieved after not be
App. GST
appl of GST leviable

TDS deductible No TDS

inder under earlier Payment would be
law & Invoice recieved after dedutible
issued as per appl of GST under
earlier law GST
 12. Return:
Existing Law:
Currently works contractor has to get registration under both service tax and VAT
therefore for return under both the act is required to be filed quarterly or annually as the
case may be.

Provision under Model GST law:

Under Model GST law every registered taxable person has to follow procedure given below:
• Upload the detail of outward supplies
supplies-including
including taxable supplies, exempt,
1 export, deemed supplies, etc BY 10 OF NEXT MONTH under GSTR-1
TH GSTR

• Auto-draft
draft of provisional GSTR
GSTR-2
2 based on the detail uploaded under
2 GSTR-11 by supplier.

• Accept/reject/modify such auto

auto-drafted provisional GSTR-2
2 By 15th of next
3 month

• Add additional purchase detail in GSTR

GSTR-2
2 which has not been uploaded by
4 the supplier

• Reconcile the GSTR

GSTR-1 & GSTR-2
2 & finalize using online/offline facility
5

• GSTR-33 automatically generated on finalization as in Step:5

6

• Pay the amount as shown in payable under GSTR

GSTR-3
3 & file the return by the
7 20th of next month.

Representation by us:
Return process under Model GST law is too much lengthy. Also detail required in forms
provided for output detail, input detail and return are so much that it will unnecessarily
increase compliance cost also this will consume too much time.

It is requested to provide single day filing for output supply, input supply and filing
of monthly return. Along with that provision to revises return should be provided in
the law to avoid litigation in future.

Action to be taken:
 IT systems/ accounting system would need to be revamped to record all the
transaction on real time basis so that your returns would get filed on time.