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Supplementary invoices for price escalation on works contracts executed before rate change attract 18% GST under Section 14(a)(i) AAR Odisha ruled that supplementary invoices for price escalation on works contract services executed before 18.07.2022 attract GST at 18% rate. Despite ...
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Supplementary invoices for price escalation on works contracts executed before rate change attract 18% GST under Section 14(a)(i)
AAR Odisha ruled that supplementary invoices for price escalation on works contract services executed before 18.07.2022 attract GST at 18% rate. Despite services being supplied before the rate change notification (03/2022-CT dated 13.07.2022), the applicable rate is determined under Section 14(a)(i) of CGST Act 2017 since no payment was made against price escalation and invoices were yet to be issued at the time of rate determination.
Issues: Determination of applicable GST rate for price adjustment invoices related to a works contract executed before a change in GST rate.
Analysis:
1. Issue Identification: The Applicant sought a ruling on the applicable GST rate under CGST and SGST Acts for price adjustment invoices related to a works contract executed before a change in the GST rate.
2. Applicable Provisions: The Applicant referred to Notification No. 24/2017-Central Tax (Rate) for the initial GST rate of 12% and the subsequent amendment through Notification No. 03/2022-CT (Rate) for the revised rate of 18%.
3. Applicant's Submission: The Applicant, a subsidiary of Voltas Ltd., executed a works contract for the RWSS, Govt, of Odisha, with a provision for price variation based on raw materials and labor charges. The Applicant invoiced at 12% GST before the rate change and is yet to issue price adjustment invoices.
4. Legal Interpretation: Section 14 of the CGST Act, 2017, deals with the time of supply in case of a change in the GST rate. The section outlines scenarios based on the timing of supply, invoice issuance, and payment receipt to determine the applicable rate of tax.
5. Decision Making: The Authority admitted the application for consideration and analyzed the events of supply, invoice issuance, and payment receipt to determine the GST rate. In this case, as services were supplied before the rate change and invoices are proposed to be issued after the change, the applicable rate was determined to be 18% (CGST @ 9% & SGST @ 9%).
6. Final Ruling: The Authority ruled that the applicable GST rate for price adjustment invoices related to the works contract executed by the Applicant for the RWSS, Govt, of Odisha, would be 18% (CGST @ 9% & SGST @ 9%).
7. Appeal Process: The Applicant or the jurisdictional officer can appeal to the Odisha State Appellate Authority for advance ruling within 30 days if aggrieved by the ruling.
This detailed analysis of the judgment provides a comprehensive understanding of the legal interpretation and decision-making process involved in determining the applicable GST rate for price adjustment invoices in the context of a works contract executed before a change in the GST rate.
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