GST Circulars
GST Circulars
GST Circulars
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\ Dated : 06.06.201 8
rnment of lndia has enacted the Ooods and Services Acl2017 throughout lndia
i.t.Al.ZOtl. The GST has subsumed various indirectTaxes of both the Central & State
nment, such as Central Excise Duty, Service Tax, Central Sales Tax (CSTI Worl<s
ract Tax (WCT)/ State Value Added Tax (VAT), Additional Custom Duty (CVD) and special
ditional Duty (SAD) apart from Entry Tax and Octroi Charges etc'
rhp qri..l-:t!.C Bi.rd!n!. f-)scr-rn]ent irsBD) rnakes prc,.,!sicns a!:er-rt lhe laver .''"'hich ri!r'ecily
qty related to Contract Value, it incorporates that whenever the tax structure is changed during
the ongoing contract and new law comes into force then the contractor has to be refunded
the increased amount of taxes, if any ancl similarly, recovery is to be made from the
contractor if the taxes have decreased.
3. On request of various States, seeking clarifications of GST and issuance of guidelines for
(lFD) of
- future references, tiris office in consultation with Integrated Flnance Division guidelines
rr\h[ fli\b rvlrnistry of Rural Development (MoRD) has worked out comprehensive and
- JUt* "- c.rtegor-ized of A, B, and D to
?5 all the projects under PMGSY into four different categories C
J Works sanctioned, prior to ALA7.2017, under different phases of PMGSY and which
are ongoing i.e. subsisting contracts( including the delayed projects, beyond the
w original intended completion date) under various stages of physical and financiai
progress -(CategorY A)
Works sanctioned, afler 0L.O7 .2017, under different phases of PMGSY wherein GST
has not been accounted for in the original proposal/sanction and wherein Tenders
have been completed-(CategorY B)
Works sanctioned after 01.07.2017, under different phases of PMGSY wherein GST
has not been accounted for in the original proposal/Sanction and for which tender
process has not been lnitiateci - (Category C).
All new works proposed and yet to be proposed i.e. works which are in the pipeline
under PMGSY - (CategorY D).
i. The new Goods and Services Tax (GST) laws require that all invoices should show the value
Js\ of supply and GST separately, and the value of supply will therefore, includp non-GST taxes,
Pl,tttr which remain embedded in the input prices, such as taxes on petroleum products.
1
ii. The Project components under different major heads (like Earth, Sand, Aggregates, Steel,
Bitumen etc.) are to be intimated by the Contractor, clrecked and confirmed by the
competent authority.
ilt. The major issue under GST regime is to identify the portion'of the existing contract that will
come under GST. Therefore, there is a need to cull out GST con'lponerlt of the existing
contracts (i.e. the value of taxes subsumed under GST).
iv. The benchmark date for this purpose will be A1".A7.7017 i.e, GST will be applicable on the
portions of the contracts that are being paid from A7.07.2017,
The value of the portion of the work not completed or not paid for as on 0'J-.A7.2077 shall be
divided into two components.
a. Value of work includingtaxes and duties such as Customs Duty, taxes on petroleum pro'ducts
$,
and other non-VAT taxes that have not been subsurhed into GST should be worked out.
The balance will be the value of taxes subsumed into GST such as Central Excise Duty and
VAT i.e. GST component.
vi. Therefore, the value of subsumed taxes under GST needs to be separated out from the
contracted amount to arrive at the value of work.
vil. The key issue is to estimate the value of subsumed tax carefutly and as accurately as
possible. For this purpose, an indicative Excel format is annexed lor guidance.
Model calculations are also attached herewith and states may workout similarly for all the
@.
irT_f taxesincluding ED, CST, VAT/WCT and other taxes which were already in the contract
'
price as per the original contract. The same format can be used to compile the information
for each ongoing project, taking into consideration the GST input tax credit available for the
project. The assessment of subsumed shall be submitted by the contractor along with
copies of invoices and statement of input taxes duly certified by a Chartered Accountant. lt is
responsibiiity of the contractor to furnish correct details of the subsumed taxes.
Once the value of work sanction and GST taxes e employer may ent-er into
zuFpteffi entaiagreEment ry
thE-value of subsumed tax . arrived as above plus GST of 1.2%. i.e,, the cost of the
qequc
ffid"r"d i, tt "tim ll" It required to be he
"
o-ngiflefcTnfrTif-price to arrive at the actual amount of "cost of the proiect".
ix. (VAT etcl to be carried
forward under their Transitional Provisions. Therefore, Section 140 of the GST law in effect
allow credit of all subsumed taxes paid by a taxable person on his inputs, including the
Central Excise Duty embedded in the price of inputs.
Thus, the supplier gets ITC into the GST credit ledger through Transitional Provisions
fincluding both theVAT anci Cenirai ixeise Duty pairl- on the inpr,tsi.
xi. The contractor while raising their bill and tax invoice post-GST, will now collect GST as
indicated above from the employer and will remit the same to the respective Government.
The entire GST of the supply will have to be finally borne by the employer'
xii. The contractor will have to pay GST on the value of work, which he will pay to the respective
Government, partly using the ITC that represents the taxes that he has already paid through
the inputs, and partly using cash coliected from the procuring entity concerned.
xiii. Through this arrangement, the supplier also cannot claim to have incurred loss on account of
embedded taxes that has been paid on the inputs.
B. ategory B '
The works sanctioned after 01.07.2017, may be treated upon status of their work, as here
under:
For works, which have been awarded and commenced on the field, action may be initiated
as detailed in the uaiegory A above.
b. Ftrr works, which have been awarded but not commenced may also be treated as above
before commencement of the work.
ii. ln cases, wlrere tenders are initiated as per the existing SBD (Standard Bidding Document)
norms, there should be no change in the evaluation criteria for selection of the bidders and
bids shall be evaluated based on the criteria mentioned in the tender documents. However,
after identification of the lowest bidder, it must be ensured that, all taxes subsumed under
GST are carefully deducted to arrive at the value of works under the GST law, and the
agreements should provide for payment of value of works plus applicable GST.
C. CategoryC
i. ln cases, where the sanctions have been obtained after 01.07 ,2017 and tenders are yet to be
initiated, the rates to be quoted shall be exclusive of GST and GST of 1,2% will be added to
the value offered by the bidder separately.
ii. The SBD may be modified to the above extent.
il1. The Bill of Quantities (BoQ shall also reflect prices offered by the bidder without GST and
applicable GST separatelv.
iv. The states shall work out the departmental cost of the work without GST for the purpose of
evaluation and comparison witJi rates offered by the bidders.
D. Category D
i. ln cases of all new works to be proposed under PMGSY, the states shall prepare Schedule of
Rate (SoR) after deducting the taxes subsumed under GST.
ii. The Detailed Project Reports shall be prepared based on this revised SoR and the state may
add 1,2% GST to cost of the work to arrive at the overall cost of the work.
iii. ln allsuch cases approval of SoR may be obtained from NRRDA as per existing practice.
6. Revision of Cost
The states shall work out the impact of GST for all the works individually for all category of
Copy to :
,,A{*{'".'
l'lationaI wa' & lnfrastructure Devel ent Iimited
GST I'lo.
Gross 0riginai \.1alue of the Vatue of SeMces lPayments ctaimed upto lO.O.ZOti- Payments ctaimed upto Bal. payments to Batance
Contract rendered upto I originat contract price 30.6.201 7-Price be made after Services to
Variation 01.O7 .7017 lot
be rendered-
seryices rendered
originat
upto 30.06.2017.
contract
(c+b,d-e)
Price
3 The rates for VAT/Output VAT are as may be appticabte for respective
Adjusted Vatue of Work done states
4 The issue of ctosing stocks are not consjdered due to complexitjes invotved
Add GST (on value ot wort<
done * Margin)
5 The Components & Taxes are indicative. lt has to be project specific
and may change
GM(P)/DGM(P)
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GOVERNMENT OF ODISHA
FINANCE DEPARTMENT
*****
Memo No. _________36116______ /F, D. 07.12.2017
FIN-CT1-TAX-0045-2017
To
All Departments of Government,
All Heads of Department.
The Goods and Services Tax (GST) has come into force w.e.f. 1st July, 2017. Works
Contract is treated as composite supply of service under GST. The GST rate for composite supply
of Works Contract to the Government, local authority or Government authority is reduced from
18% to 12% (CGST 6% and SGST 6%) vide Finance Department notification No.24672 dated
22.8.2017 and 27987 dated 21.9.2017. Further, the GST rate for composite supply of Works
Contract involving predominantly earthwork (that is, constituting more than 75% of the value of
the Works Contract) provided to the Central Government, State Government, Union Territory,
local authority, a Governmental authority or a Government entity has been reduced to 5% (CGST
2.5% and SGST 2.5%) vide Finance Department notification No.29779 dated 13.10.2017.
However, different Departments have raised different issues regarding Works Contracts awarded
in pre-GST regime and GST regime. After careful consideration of the issues, the Government
have been pleased to issue the following clarifications :
1. Works Contracts executed before 01.07.2017 and payments made in pre-GST period
and GST period.
(i) In the pre-GST regime, taxes like Central Excise Duty, Entry Tax, OVAT and
Service Tax have been included in the estimated value of the Works Contract and
form a part of the bid price as well as of the contract price. Accordingly, the value
of the contract was inclusive of all taxes.
(ii) In case of Running bills, submitted before 1st July, 2017, the provision of VAT and
Service Tax were applicable.
(iii) The Running bills/Final bills submitted after 1st July, 2017 for the works executed
in the GST regime, the tax invoice is to be issued by the contractor showing CGST
and SGST as applicable separately within the contract value of the works.
(iv) In case, TDS amount has been deducted before 01.07.2017, but not yet deposited
in State Government exchequer under the Head of Account – 0040 through
challan, the same may be deposited immediately.
Page 311
2. Works Contract executed after 01.07.2017 but tender invited before 01.07.2017
(i) In case, the tender for works contract was invited before 01.07.2017, but
agreement to be executed after 30.06.2017, the tender may be awarded to the L-1
bidder with the stipulation that the quoted price is inclusive of GST as applicable
and appropriate GST will be shown separately in the invoice within the contract
price. If the L-1 bidder does not agree with the aforesaid arrangements, the tender
invited may be cancelled.
(ii) For work contract executed in the GST period, provisions of GST Acts are
applicable.
(iii) The TDS provisions under the GST Act (i.e. Section 51 of OGST Act/CGST Act)
have not yet come into effect. Therefore, no TDS deduction is to be made under
GST Acts against payments released or to be released to the executants after
01.07.2017 until further communication.
(iv) As per the GST Acts, the executant is bound to issue GST invoice for receiving
payment. Therefore, once the measurement of the work is completed
(running/final measurement) and the gross amount payable to the executant is
determined by the engineer-in-charge of the work, the executant shall issue GST
Invoice showing CGST and SGST separately within the contract price.
(v) The executant, on receipt of payment, has to discharge his tax liability under the
GST Acts accordingly.
3. Preparation of estimate for new works after 01.07.2017
(i) The estimate of the work is to be prepared on the basis of revised Schedule of Rate
– 2014 issued by Works Department vide their OM No.13827/W dated 16.09.2017
. In case, goods and services required for the execution of works contract are not
covered in the revised Schedule of Rate issued by Works Department, the
Administrative Department may prepare the same deducting Central Excise Duty,
Entry Tax, OVAT and Service Tax as applicable before 01.07.2017 in consultation
with Finance Department.
(ii) The GST as applicable will be added with the estimated cost of the work
separately.
In case of any further clarification in the matter, the Administrative Department may refer
the proposal to Finance Department.
Sd/-
Principal Secretary to Government
Page 312
GOVERNMENT OF WEST BENGAL
Finance Department
Audit Branch
3. Pre-GST contracts:
1
~ ii. With regard to supply of only services (eg: Consultancy, Security Services, Cleaning,
etc ) the following procedure is to be followed'
Situation Mode of Treatment
SI.
iii. With regard to works contracts (eg: roads, buildings, etc.) where the supply is of
both goods and services:
SI. Situation Mode of Treatment
2
~ iv. When invoices/bills are to be raised by the contractor/supplier, the value of the bill
together with the applicable tax under GST (i.e. WBSGST + CGST in case of local
purchase from within the State) should not exceed the value that such
st
contractor/supplier would have billed for prior to 1 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
GSTwill arrive at the taxable value in accordance with the formula below:
Taxable (Value inclusive of taxes) X 100 / (100+ sum of CGST & SGSTtax
value = rates)
So here, the project value (excluding tax), with, lets say, a GST rate of 6% CGSTand
6% SGST,will be = 100000 X 100/112= 89285.70/-
Rs.
Project value (excluding tax) 89285.70
Add: CGST@ 6% 5357.15
Add: SGST@ 6% 5357.15
Total 100000.00
4. Post-GST contracts:
i. With regard to post-GST contracts or ongoing projects where estimates have been
approved before 1st July 2017 i.e. those work orders given/to be given for supply of
goods or services or both (works contracts), GST rates will be applicable. In other
words, the supplier of goods/services/both has to pay WBGST and CGST on all
taxable goods/services.
ii. Under the West Bengal Value Added Tax Act 2003, "works contract" covered both
moveable and immoveable property, whereas, "works contract" under GST is
restricted only to immovable property.
3
In GST, works involving supply of taxable goods along with labour to any
moveable property(e.g. servicing of motor vehicle with motor parts, AMC contract
for computers or AC machines or generator, repair of furniture, etc) has been
referred to as "composite supply" as the supply of goods and labour are naturally
bundled and made in conjunction with each other. The rate of tax for a "cornposite
supply" will be that of the principal supply. In other words, the pre-dominant nature
of the contract will be the deciding factor. The principal supply can either be of
service or goods. For instance, in the case of servicing of motor vehicles or AMC
contracts the principal supply is service and the rate of tax on service shall be
applicable. On the other hand, where a contract is for supply-cum-installation of AC
machine, then here the principal supply will be AC machine and the rate of tax of the
AC machine will be applicable.
iii. No TDS under GSTis to be deducted till Section 51 (i.e. the Section relating to TDS) of
the WBGST/CGSTAct is notified and made operative.
sd/-
(H.K. Dwivedi, IAS)
Principal Secretary to the
Government of West Bengal
4
" 8. Director, _
9. Director of Treasuries & Accounts, West Bengal, Mitra Building, 8, Lyons Range,
3rd Floor, Kolkata - 700001.
10.District Magistrate / District Judge / Superintendent of Police, _
l1.Sub-Divisional Officer, _
12.Block Development Officer, _
13.Pay & Accounts Officer, Kolkata Pay & Accounts Office-l, 81/2/2, Phears lane,
Kolkata -700012.
14.Pay & Accounts Officer, Kolkata Pay & Accounts Office-II, P-l, Hyde lane, Kolkata
-700073.
IS.Pay & Accounts Officer, Kolkata Pay & Accounts Office-Ill, IB Market, 1st Floor,
Block IB, Sector Ill, Salt Lake, Kolkata - 700106.
16.Treasury Officer, _
5
CERTIFICATION WORK BY A PRACTICING CMA
ON IMPACT OF GST ON EXISTING WORKS
CONTRACTS IN RAILWAYS
I ndian Railway is considered to be the back bone of Indian economic system and it is the lifeline for many commuters and
business man. Transportation of passengers and transportation of goods are the two principal outward supply of services
that Railway is engaged with. There are 17 distinct Railways which operate under the administrative control of Railway Board
and each of the Railways have multiple Divisions, Carriage Repairing Work Shops (Diesel Locomotive Works) and a Head Quarter
which has engaged GST Consultants to guide the Railways in the matter of GST as Railway Board has instructed in many of their
Communications to engage GST Consultants at each of their Office.
Railways apart from Railway Electrification Divisions, Railway Construction Divisions and Wagon Manufacturing Units (Rail
Coach Factory) usually outsource many of their services and award hundreds of contracts at each Division and Office. Contracts
in Railways are awarded for Supply of Goods or under Works Contract every year. Usually Works Contracts are awarded on all
inclusive basis and payment of all taxes and duties is the responsibility of the Contractor. After implementation of GST, Railway
Board advised all Railways to make an impact analysis of GST on the Works Contracts which were awarded before 01.07.2017
(administered date for GST) but execution/payment of which is pending in part or full after this date. Each of the Railway issued
an extensive guideline (Joint Procedure Order) for making such impact analysis and tax neutralisation thereof. In a recent
Circular bearing No. 2017/CE-I/CT/7/GST, dated 16.04.2017, Railway Board has considered Practicing Cost Accountants to
certify the Work Sheet of tax liability before GST and after GST. A Contractor can engage a Practicing Cost Accountant for such
tax impact analysis and certification which is required to make a supplementary agreement based on which payments will be
released to the Contractor.
An in-depth study of the Contract Agreement awarded to the Contractor along with Supplementary Agreements or Revised
Agreements, if any needs to be studied by the CMA to understand the type of work, period covered, cost elements in respect to
manpower, material, machines and tax components etc. under each Schedule. Payments made upto 30.06.2017 can be
ascertained from the last Bill cleared by the Railway or considering period of completion if the pricing is firm and can be
ascertained in terms of period left.
All the taxes and duties which the Contractor was liable to pay during the pre-GST regime like Excise Duty on material and
equipment, CST/VAT on material which was levied at different stages in the value chain, VAT on Works Contract, Entry Tax,
Service Tax liability of the Contractor etc. needs a detailed analysis. Rate of taxes and duties, exemption, abatement are to be
considered as per their applicability during pre-GST regime. Purchase Invoice, Quotations, Scheduled Rate of material of
TAX BULLETIN MAY, 2018 VOLUME - 15 - THE INSTITUTE OF COST ACCOUNTANTS OF INDIA 1
different authorities are the likely sources to know the unit rate and applicable tax rates in many cases. VAT Returns, CST
Returns, Entry Tax Returns, Service Tax Returns, Excise Returns filed during the pre-GST regime can help one to understand the
applicable tax rate for inward and outward supply made by a Contractor in the erstwhile tax regime.
Input Tax Credit (ITC) available to the Contractor (whether availed or not by the Contractor by filing return), both in pre-GST and
GTS regime on the balance value of Works Contract is to be adjusted while making such tax impact analysis.
As a Supplementary Agreement will be made on the basis of certified Work Sheet, one has to take extreme care ensuring that
all possible taxes and duties which the Contractor was liable to pay (or was paying directly or indirectly like Excise Duty though
not visible was a part of material cost) and ITC available to him during the pre-GST regime has been considered on the balance
value of the Contract. Similarly, correct GST rate and ITC available to the Contractor in GST regime is another important aspect
which needs careful study and inclusion in the Work Sheet.
TAX BULLETIN MAY, 2018 VOLUME - 15 - THE INSTITUTE OF COST ACCOUNTANTS OF INDIA 2