WORKS CONTRACT

[AJIT Tiwary]

Dear Sir,

my client is a road contractor and the gst rate applicable @12% but those projects which has been started before 01/07/2017 and still work in progress. the old agreement related to cost has not been revised by the state government after implementation of gst. when we produce bill for payment the department determine it inclusive of gst. i can illustrate it as follow:

Suppose overall contract price= 150

pre-gst

Bill produce= ₹ 100

Vat Deducted=Rs. 4( Vat @4%)

Balance receive= 96 (assuming that tds has been deducted)

post gst

Bill produce= ₹ 50 (as per department it is inclusive of gst)

our turnover i.e net of tax (50/112*100=44.64 and balance amount will be considered as gst)

in this situation what we should do, can we make representation to commissioner of goods and service tax

on the other part the road contractors are eligible for input tax credit.

kindly resolve it soon

thanks

[Alkesh Jani]

Sir,

For your ready reference, the provisions of Section 142(2) (a) and (b), which are applicable in your case are reproduced below:-

(a) where, in pursuance of a contract entered into prior to the appointed day, the price of any goods or services or both is revised upwards on or after the appointed day, the registered person who had removed or provided such goods or services or both shall issue to the recipient a supplementary invoice or debit note, containing such particulars as may be prescribed, within thirty days of such price revision and for the purposes of this Act such supplementary invoice or debit note shall be deemed to have been issued in respect of an outward supply made under this Act;

(b) where, in pursuance of a contract entered into prior to the appointed day, the price of any goods or services or both is revised downwards on or after the appointed day, the registered person who had removed or provided such goods or services or both may issue to the recipient a credit note, containing such particulars as may be prescribed, within thirty days of such price revision and for the purposes of this Act such credit note shall be deemed to have been issued in respect of an outward supply made under this Act:

Provided that the registered person shall be allowed to reduce his tax liability on account of issue of the credit note only if the recipient of the credit note has reduced his input tax credit corresponding to such reduction of tax liability.

Moreover, contract clauses may be referred regarding tax, if it is to be inclusive or to be levied separately. If nothing regarding this is mentioned then refer tender and its clauses. If nowhere it is clarified then the valuation shall be as per Rule 35 of CGST Rules, 2017.

With regards to ITC, if your main contractor and not sub-contractor, ITC is not available.

I invite our experts to correct me, if mistaken.

[AJIT Tiwary]

Dear Sir

Thanks for your reply

in case of input tax credit my opinion is that in case of government contract the owner of the property will be the state government and the agency i.e Road construction Division is a main contractor and the main contractor is appointing us as a contractor(i.e sub contract), secondly

if the purchase of goods and services by the contractor to make the road project and handed over the project to the road construction division, we can take the credit as for furtherance of business by the road contractor.

kindly reply me

thanks

[KASTURI SETHI]

How can you call yourself sub-contractor ? In my view, you are main contractor and hence not eligible for ITC. Agree with Sh.Alkesh Jani Ji. Govt. department acts for and on behalf of President/Governor of India. It is mentioned in contract executed between the Contractor and Govt. Department of Central Govt./State Govt. Check the Contract. Who is really Main Contractor ?

However, I am of the view that this issue is worth raising before GST Council and hopefully next meeting is on 10.3.18. You are not alone sufferer on this issue. If you raise the issue, Govt. may clarify or amend ITC Rules.

[SIDHARTH JAIN]

So wat is the outcome...

Whether input will be allowed to contractor who is making the road or repairing the road...

AI Summary

Price revision under GST requires supplementary or credit notes for pre-GST contracts, impacting invoicing and ITC eligibility. Price revisions to contracts entered into before the GST appointed day require issuance of supplementary invoices or debit notes for upward revisions and may permit credit notes for downward revisions, these being treated as outward supplies and affecting tax liability only where the recipient adjusts input tax credits; contract or tender clauses control whether prices are inclusive of tax and, if silent, statutory valuation rules apply. Eligibility for input tax credit by road contractors under government contracts depends on whether the party is a main contractor or a subcontractor and on the contract terms.