TaxTMI 
TaxTMI 
2024 (4) TMI 101
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.... Act would be mentioned as being under the "GST Act" A. SUBMISSION OF THE APPLICANT (in brief):- M/s. Jaipur Metro Rail Corporation Ltd. ("JMRC" in short) awarded the contract to M/S. Continental Engineering Corp ("CEC" in short) for the Designing and Construction of Tunnel between Chand Pole and Badi Chaupar and reversal line by Shield TBM, Underground Metro Stations at Choti Chaupar & Badi Chaupar by Cut & Cover Method on East-West Corridor at Jaipur Metro (Phase 1B) at Jaipur, Rajasthan on 5th Oct. 2013. In this agreement the amount quoted was lump sum including all taxes except VAT, the then tax instead of GST, because the VAT was exempt for the JMRC Project vide Notification issued on 06.10.2010 by Rajasthan Government. The Contractor was supposed to pay all taxes, duties and fees required to be paid by him under the prevailing statutes contract and the contract price was not to be adjusted for any of these costs except as stated in sub-clause 13.7 (Adjustment for change in Law) of General Condition Clause (GCC) of agreement. Under pre-GST regime, "Works Contract" has been defined in Section 65B of the Finance Act, 1994 as a contract wherein transfer of property in goods i....
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.... for completion of the main contract, then service tax is obviously not leviable on the works contract service provided by such sub-contractor." Hence, the above clarifications issued by the CBEC make it clear that there are two categories of sub-contractors for works contract services: (i) those to whom the support services are outsourced and (ii) those to whom part of the main work is outsourced. Work done by (ii) is treated as work of the same nature as the service of the main contractor and the same exemption is available for such work. On the other hand, subcontractors of category (i) provide services that are different in their nature, and these are treated differently. They are, at best, input services for the main works contract service. As per Contract between CEC and JMRC, the payments are made in close regard to the contract price and the fluctuations that arise are taken into consideration, in a price variation (P.V) bill. Moreover, the Clause 13.7 also states that "The contract price shall be adjusted to take account of any increase or decrease in cost resulting from a change in the laws of the country (including the introduction of new Laws and the repeal or mod....
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.... Rail Project. As per the contract agreement, Value Added (VAT) and Rajasthan State Entry Tax were exempted. As per Section 15(1) of CGST Act, 2017, the VAT paid was adjusted, and accordingly the value of supply was to be determined. In this matter, JMRC started making payment of GST by deducting the amount Of VAT payable by the CEC (other Party), adjustment of the Central Taxes, CST etc. as per the prevailing laws of the period on the date the agreement was executed, because the amount of taxes included in the cost of the works as per the agreement was kept the duty/liability of the CEC only. The Service Tax portion was part of the Agreement, to be paid by the CEC itself, and accordingly, the same was presumed to be 40% Of the works executed in the bill, and the same was not paid extra, being exempted and not to be included in the Contract Price. Keeping the same in mind, the following proposal was submitted by JMRC regarding the computation of the additional GST liability to be borne by JMRC: GST Applicable 12% 18% Less: CGST Portion payable by the Contractor 6% 9% Less: Service Tax, currently applicable in this contract (Subsumed in the GST)=18% * 40% component of t....
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....sess the net impact of GST on the cost of a pre-GST lump sum contract? Ans- With regard to works contracts where the supply is of both goods and services: Works Contracts executed on or after 1st July 2017 and invoice bill raised on or after 1st Jul 2017 SGST and CGST rates will be applicable. 2. How to compute the value of supply to levy GST of a lump sum work contract entered under pre-GST tax regime? Ans- When invoices are to be raised by the contractor, the value of the bill together with the applicable tax under GST (i.e. SGST + CGST within the State) should not exceed the value that such contractor/ supplier would have billed for prior to 1st July, 2017 inclusive of VAT and Service Tax, if any. For instance, say, as per pre-GST contract agreement (which was inclusive of VAT and service tax, if any) the value of the project is Rs. 100000/-, the bill/ RA bill under GST will arrive at the taxable value in accordance with the formula below: Taxable value (Value inclusive of taxes) X 100/ (100+ sum of CGST & SGST tax rates) So here, the project value (excluding tax), with, let's say, a GST rate of 6% CGST and 6% SGST, will be = 100000 X 100/112= 89285.70/ Thus ....