works contractor - gst component not given by department

[giri gattupalli]

respected sir,

one of my cleint is govt works contractor. and he provided civil works service to errigation department amounting to rs 1,00,00,000 (aprox) . during fy 2023-24 and taxable at 18%. and he has received part payment amounting to rs 60,00,000 only. and the balance is pending with dept due to some technical reasons. we have raised tax invoices against service provided, with showing gst component. and department issued payment memos for 60,00,000 and no gst is shown in payment memo and after enquiry we came to know that department deliberately not given gst amount aprox amounting to rs 10,00,000 .

i request you to guide me weather to show turnover in return and pay tax or not to show turnover till gst received from errigation depat.

thanking you

[Sadanand Bulbule]

Since tax invoices have already been raised for the works contract service, the turnover should be reported in GST returns and GST must be paid notwithstanding non-receipt of the GST component from the Irrigation Department.

[KALLESHAMURTHY MURTHY K.N.]

Sir,

There are certain aspects involved in the issue. What was the agreed project value in the work order issued by the Irrigation Deptt. Whether GST was included in the project value or not. Whether TDS was made in the bill amount passed by the Deptt. If you raised the tax invoice on the total value of work done and separately collected GST, or adjusted it out of the total value of work done. If the project value is inclusive of the GST amount, the act of the Deptt. Is correct. If you have raised tax on the total value of work done, but if restricted by the department for any technical reason, you have to negotiate with the Irrigation department. If you have paid excess tax over and above the approved project value, you have to litigate with the Court of Law, since you have paid the tax on the strength of the tax invoice raised. You cannot get a refund from the department easily.

[KASTURI SETHI]

The whole issue revolves around whether contracted amount is inclusive or exclusive of GST. From the query it appears that contracted amount/value is inclusive of GST.

Correct and concrete reply is possible only after going through terms and conditions of the contract. The querist is request to post relevant clauses of the contract executed

[YAGAY and SUN]

In the present case, GST liability arises on the basis of "time of supply" under Section 13 of the CGST Act, 2017. Since tax invoices have already been issued for the civil works services provided to the Irrigation Department during FY 2023-24, the supply stands completed and GST becomes payable irrespective of actual receipt of consideration. Accordingly, the entire taxable turnover relating to the invoices raised is required to be disclosed in GSTR-1 and GSTR-3B for the relevant tax period. Non-reporting of turnover merely because payment is pending from the Department may attract demand, interest and penal consequences under the GST law. It is pertinent to note that GST is payable on accrual basis and not on receipt basis, except in cases specifically covered under composition scheme or notified categories. Therefore, withholding of GST component by the Department does not defer or extinguish the statutory tax liability of the contractor. Further, if the Department has released only Rs. 60,00,000 without separately reimbursing GST, the contractor should immediately issue formal correspondence/legal representation demanding release of the withheld GST amount along with supporting invoices and contractual terms. The contractor may also verify whether any deduction has been made under Section 51 relating to TDS under GST. Hence, legally, the safer and compliant view is to declare the full invoiced turnover and discharge applicable GST liability, notwithstanding non-receipt of balance payment from the Department.

[Shilpi Jain]

Pls chk with a consultant so that the contract terms are looked into and suitable action can be decided i.e. to pay GST by considering price is inclusive and/or filing a suit to claim the GST from the irrigation department

[Amit Agrawal]

Contractor is liable to pay applicable gst against taxable value of supplies made by him. This liability to pay is not dependent on whether he receives consideration and / or gst against services provided by him from his customer/s or not.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.

AI Summary

Works contract GST liability continues despite payment withholding; contract terms decide whether GST is inclusive or separate. GST liability on a works contract supply arises from the taxable supply and the time of supply, not from receipt of payment. Where tax invoices have already been issued for civil works services, the corresponding turnover should be reported in GST returns and applicable GST discharged even if the department has withheld part of the payment or the GST component. The contract terms must be checked to determine whether the agreed value is inclusive or exclusive of GST.