Works Contract under GST 29 April 2017

Definition - Works contract Contract for building, construction, renovation etc. Immovable property Transfer of property in goods

Whether Works contract service – Outsourced scenario Maintenance of an Immovable property Supply of labour (Maintenance Service or works contract ???) Contractor Awarder of the Contract Supply of material and labour (Works Contract) Subcontractor

Aspects of GST Valuation Time of supply Place of supply Rate Supply

Supply Supply Supply of Goods Supply of Services Composite Supply Mixed Supply Supply Supply of immovable property outside GST

Composite or Mixed Supply Composite supply Two or more taxable supplies Goods, services or combinations Naturally bundled Supplied in conjunction E.g. site formation service for construction Mixed supply Two or more individual supplies for a single price Other than composite supply Tax liability on supply as applicable to principal supply Tax liability on supply as applicable to supply with highest rate of tax

Immoveable property (Service) Types of supply Supply categories Goods Supply of machine Services Installation service Mixed supply Composite supply Moveable property (Principal supply) Immoveable property (Service) Plant and Machinery Creditable Civil work Non creditable

Place of supply PO raised to construct wall in Maharashtra ABC Ltd Contractor in Maharashtra PO raised to construct wall in Gujarat Place of supply of service in relation to an immovable property shall be the location of an immovable property Location of Supplier Maharashtra Place of Supply/ Consumption Maharashtra Gujarat Nature of Supply Intra-State/ local Inter-State

Time of Supply of Service Earlier of date of invoice or payment (if invoice issued within prescribed time period) Earlier of date of provision of services or date of payment (if invoice not issued within prescribed time period); or In all other cases, date on which the customer shows receipt of services in his books of account. Time of Supply of Services – Forward Charge In case of Continuous Supply of Service: Payment milestone Earliest of date of invoice / payment receipt for no milestone If payment linked to completion of event - Completion of event Time of Supply of Services – Forward Charge GST on advances ……..

Value of Supply of Service Transaction value, which is the price actually paid or payable for the said supply of goods or services Amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply Abatements - ??? Deduction of land value – Currently not provided Any taxes, duties, fees and charges levied under any statute other than the GST levy to be added

Business model – 1 (Free Supply) Sub-contractor VAT 5.5% Service Tax 6% GST 18% Contractor GST paid on material procured by awarder of the contract would become cost GST 18% Free supply VAT 5.5% Service Tax 6% Excise duty 12.5%, CST 12.5%, VAT 5.5 % / 15% Awarder of contract Supplier GST 12% / 18% / 28%

Business model – 2 (Sourcing through contractor) GST paid on material procured by Contractor would be creditable Sub-contractor VAT 5.5% Service Tax 6% GST 18% Excise duty 12.5%, CST 2%, VAT 5.5 % / 15% Supplier Contractor GST 12% / 18% / 28% GST 18% VAT 5.5% Service Tax 6% Awarder of contract

Business model – 3 (Developer) VAT 5.5% Service Tax 6% Contractor Sub-contractor GST 18% Excise duty 12.5%, CST 2%, VAT 5.5 % / 15% Free supply VAT 5.5% Service Tax 6% GST 18% GST 12% / 18% / 28% Supplier Developer Excise duty 12.5%, CST 12.5%, VAT 5.5 % / 15% GST 12% / 18% / 28% GST paid on material procured by Developer would become cost VAT 1% Service Tax 4.5% GST 18% Customer

Input Tax Credit No credit of works contract service if resultant property is immovable (except plant and Machinery) except used as an input service for further supply of works contract service No credit on goods and services used for construction of an immovable property if the said construction is on its own account Deferred credit of GST on advances if services are procured later Credit available subject to payment to vendor within 180 days – Retention money ???? Credit available even on structural support of plant and machinery

Transitional provisions Goods and services supplied after the appointed day for which contract was entered prior to appointed day would attract GST Goods and services supplied prior to the appointed day to attract VAT and Service Tax as applicable Availability of credit of VAT and service tax paid under existing law to the extent supplies made after the appointed date Construction service provider paying service tax on 30% of value under 26/2012, would be allowed credit of taxes paid on inputs subject to availability of duty paying document or 40% of the CGST payable in absence of such document Transitional credit would be reduced to the extent of outstanding declaration forms under CST laws

Other Compliance related issues Works contract TDS Reverse charge E-way bill Registration HSN of goods or SAC of services Mismatch of credit

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