TaxTMI 
TaxTMI 
Standard Operating Procedure (SOP)/Directive for post-GST payments of pending bills related to work orders issued during pre-GST period.
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.... i.e., VAT regime and the works has completed partly/wholly after the implementation of GST. Hon'ble Jharkhand High Court has directed the Government of Jharkhand to issue guidelines on this matter in its order dated 16-03-2021 in WP (T)- 2108/2019. The main issue under consideration is for the payment of pending bills related to work order issued during pre GST period and supply of Works Contract services is executed under GST regime which is discussed as below;- 1. The term "Works Contract" is defined under sec 2(lxiii) of JVAT Act, 2005 as follows- " Works Contract" means and includes any agreement for carrying out for cash or deferred payment or other valuable consideration, for assembling, construction, fabrication, erection, installation, modification, fitting out, improvement or repair of any building, road, bridge or commissioning of any other immovable or movable property. 2. The term "Works Contract" is defined under sec 2(119) of JGST Act, 2017 as follows- " A contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning ....
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....tion given by the Hon'ble High Court of Jharkhand an SOP is being issued in consultation with the departments concerned and after the approval of the Competent Authority. 8. Under the GST tax regime, the rate of GST on Works Contracts for Government work was notified at 18% vide notification no-11/2017,CT(R) dated 28.06.2017. However, the rate of GST on Works Contracts for Government work was reduced to 12% [Notification no. 20/2017- CT (Rate) dated 22.08.2017]. However, vide Notification No. 22/2021,CT (Rate) Dated - 31/12/2021, rate has been changed to - Services Rate of Tax w.e.f Work contract services provided to Government authorities and Government entity. 18% 01-01-2022 Vide Notification No. 03/2022, Dated - 13/07/2022 Services Rate of Tax W.e.f Work contract services provided to central Government, state Government and local authorities. 18% 18-07-2022 Composite supply of works contract involving predominantly earth work (that is constituting more than 75 % of the value ofthe work contract) provided to the central Government, state Government, local authorities. 12% 18-07-2022 So in the per....
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....d declared in the returns filed, by way of filing TRAN-1 and TRAN-2. 11. Payments for Work Contracts The contract price is generally inclusive of all taxes in most of the contracts; these taxes have now been subsumed under GST. In order to arrive at the incidence of applicable VAT/ Service Tax/ GST as mentioned at Para 9 above, the total work shall becategorized as follows: (i) Works completed up to 30.06.2017 and Billing completed by 30.06.2017. (ii) Works completed up to 30.06.2017 and Billing not completed by30.06.2017. (iii) Works yet to be completed as on 01.07.2017. JGST Act, 2017 shall be applicable for all the works mentioned above at (ii) & (iii). 12. Following procedure may be adopted by various Executing Agencies/Authorities for calculating the incidence of tax while making payments as per the provisions in the contracts:- i. The Goods and Services in the various project under different major heads (likeEarth, Sand, Steel, Cement, Bitumen etc.) and for services (design, consultancy, security, architect etc.) are to be intimated by the contractor and checked/ confirmed by the respective executing agencies/authorities i....
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.... as deemed fit and accordingly the concerned state department shall assess the incidence of total tax (inclusive of central and state taxes) applicable in the pre GST regime and compare it with the total incidence of tax as applicable on such goods and services under the GST regime. vii. While calculating the positive or negative impact of GST, the state department must keep in mind the availability of ITC of goods and services both in case of GST unlike in the VAT regime where ITC of services were not available. 13. After comparing the net increase/decrease in tax liability to the total tax levied under VAT regime and GST regime and also accounting the ITC availability, any conclusion regarding negative or positive impact on cost may be arrived at. 14. It may be clarified that under no circumstances there will be a revision of any contractual values in the contract, in cases where the work has to be completed before 30.06.2017 as per the contract, but the execution got delayed as a result of delay on part of the contractor. 15. No revision of contractual value should be considered if there is no clause for revision in contractual value due to ch ange in therate o....
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....scalation in the cost of contract, post GST allegedly on account of increase in incidence of tax due to implementation of GST. A comparision has been made on that half value of the left work i.e. Rs. 1,00,000 with incidence of tax in pre and post GST and their effective cost on the project on account of these taxes thereof. Table- III Pre GST GST GST Excise Basic Input Output Implica duty/ Total price service VAT VAT rate Cost tions GST cost (Cost tax rate and Incl. Excess (For GST 12% under excluding rate and and output all GST cost balanc Amou work GST Output VAT, its amoun VAT taxes rate due to e nt contrac consider Input VAT & amount work) Excise/ of Excise duty/Ser Service Tax) t of input VAT consideri ng VAT Input & GST t duties ing GST Input vice tax 9=(2+8) 10=(2+8 1 2 3 4 5 6 7 8 11 @ 12% ) Cost of the 90,00 0 12% projec t (a-b) Bitum 12% 5.5% 5.5% 15,30 12,912 2,324 1,828 14....