Works contracts consists of the three kinds of the taxable activities which is as per the current law. It also involves the supply of goods as well as the supply of services. If a new product is however created during the works contract, thus then such a manufacture is considered as a taxable event.
According to the present law, the supply of goods is considered as taxable in the form of VAT and the service is also taxable under the service tax.
However , If a new product appears in the process of the completion of the works contract, Central Excise duty is however levied.
So, the different aspects of only a single activity are however taxed by the different laws. This thus causes a lot of confusion regarding the treatment and the taxability which is as to why there are so many legal disputes in the related to works contracts.
GST however aims in order to put an end to the uncertainty for the legislature.
The purpose of this article is to make the reader aware of the impact of GST which is on the ongoing construction work contracts.
There are some Specific transition provision which have stipulated vide Section 159 and also 160 for the works contract/ periodic for the supplies which is as under:
Section 159, states that the goods and/ or the services which are supplied on or either after the appointed day in the pursuance of a contract which is entered into prior to the appointed day shall also thus be liable to the tax under the provisions of this Act.
Section 160 states that Notwithstanding anything which is contained in section 12 and 13, no tax shall however be payable on the supply of the goods and/ or the services which is made on or however after the appointed day if the consideration for the said supply has however been received which is thus prior to the appointed day and the duty or the tax payable thereon has however already been paid under the earlier law.
However let us analyse this further in detail :
> As per the above, it thus appears that in case of the periodic/ continuous supply of the goods/ services, GST Act would thus not apply on the advances which are received prior to the GST law for the goods/ services which are however to be provided during the GST regime, provided that the tax has thus been paid on the same. This provision also however does not cater to the scenario where tax has however not been paid, but is also payable under the earlier law which is thus post enactment of the GST regime.
> Also, there is thus no provision for the treatment of the supplies which is thus prior to the GST law, where however either the invoice has thus not been raised for the same, or the payment has however not been received, or that also tax has not been paid, prior to the enactment of the GST law. This could thus also result in dual taxation, both under the previous regime as well as also under the GST regime.
Also , the contractors are required to examine the coverage which is of the transition provision as to whether the implications for all its thus possible transactions during the transition period are however clear.
According to the present law, the supply of goods is considered as taxable in the form of VAT and the service is also taxable under the service tax.
However , If a new product appears in the process of the completion of the works contract, Central Excise duty is however levied.
So, the different aspects of only a single activity are however taxed by the different laws. This thus causes a lot of confusion regarding the treatment and the taxability which is as to why there are so many legal disputes in the related to works contracts.
GST however aims in order to put an end to the uncertainty for the legislature.
The purpose of this article is to make the reader aware of the impact of GST which is on the ongoing construction work contracts.
There are some Specific transition provision which have stipulated vide Section 159 and also 160 for the works contract/ periodic for the supplies which is as under:
Section 159, states that the goods and/ or the services which are supplied on or either after the appointed day in the pursuance of a contract which is entered into prior to the appointed day shall also thus be liable to the tax under the provisions of this Act.
Section 160 states that Notwithstanding anything which is contained in section 12 and 13, no tax shall however be payable on the supply of the goods and/ or the services which is made on or however after the appointed day if the consideration for the said supply has however been received which is thus prior to the appointed day and the duty or the tax payable thereon has however already been paid under the earlier law.
However let us analyse this further in detail :
> As per the above, it thus appears that in case of the periodic/ continuous supply of the goods/ services, GST Act would thus not apply on the advances which are received prior to the GST law for the goods/ services which are however to be provided during the GST regime, provided that the tax has thus been paid on the same. This provision also however does not cater to the scenario where tax has however not been paid, but is also payable under the earlier law which is thus post enactment of the GST regime.
> Also, there is thus no provision for the treatment of the supplies which is thus prior to the GST law, where however either the invoice has thus not been raised for the same, or the payment has however not been received, or that also tax has not been paid, prior to the enactment of the GST law. This could thus also result in dual taxation, both under the previous regime as well as also under the GST regime.
Also , the contractors are required to examine the coverage which is of the transition provision as to whether the implications for all its thus possible transactions during the transition period are however clear.
While if we only discuss about the work contracts , we would see that for
1. Input Tax Credit :
The Revised Model GST Law mentions that the input tax credit is however not available for-
• The works contracts services when they are supplied for the construction of immovable property, other than the plant and machinery, except thus where it is however an input service for the further supply of the works contract service
• goods or services which are also received by a taxable person for the construction of an immovable property thus on his own account, other than the plant and machinery, even when it is however used in the course or either for the furtherance of business.
1. Input Tax Credit :
The Revised Model GST Law mentions that the input tax credit is however not available for-
• The works contracts services when they are supplied for the construction of immovable property, other than the plant and machinery, except thus where it is however an input service for the further supply of the works contract service
• goods or services which are also received by a taxable person for the construction of an immovable property thus on his own account, other than the plant and machinery, even when it is however used in the course or either for the furtherance of business.
2. In case of Abatement,
there is No abatement which has been prescribed for the works contract service so far. Currently there is VAT which is payable on the works contract. Service tax is however paid @15% on the either 40% (on new work) or either 70% (on the repair, maintenance work).
there is No abatement which has been prescribed for the works contract service so far. Currently there is VAT which is payable on the works contract. Service tax is however paid @15% on the either 40% (on new work) or either 70% (on the repair, maintenance work).
Also , in case no abatement/ composition is also provided, it may alos lead to the significant increase in the tax burden, especially if such kind of works contract is however taxed at the Standard GST rate (which is 18%) and also even if it is thus subjected to lower tax rate (12%).
3. Composition Scheme
Composition scheme is also not available to the works contractors as it is thus treated as a service under GST. Composition scheme is however only available to the suppliers of goods. This will thus be a big blow to the small sub-contractors who however cannot opt for the composition scheme. They will also be forced in order to register for normal taxation scheme which is however increasing their compliances and the costs.
Legal Raasta , an online web portal which provides more than 100+ legal services has built however an extremely easy-to-use and an intuitive software for GST . However , the founders of LegalRaasta a startup which provides legal services aims at easing the difficulties related to GST by providing many services . Choosing LegalRaasta is beneficial as:
1. It has , 30+ offices in India
2. It has 10+ years experience
3. It helps to save your time
4. There is a cash back guarantee
Some of the services which it provides are :
1. Tax Filing/TDR – GST Registration , GST Return, ITR , TDS Return filing, Business income return , Bulk return filing , Revised return filing , Respond to tax notice
2. Company Formation – Pvt. Ltd., Limited Liability Partnership (LLP) , OPC registration
3. Registrations – DSC, Trademark, Patent , Copyright
It thus also provides many more services .
Composition scheme is also not available to the works contractors as it is thus treated as a service under GST. Composition scheme is however only available to the suppliers of goods. This will thus be a big blow to the small sub-contractors who however cannot opt for the composition scheme. They will also be forced in order to register for normal taxation scheme which is however increasing their compliances and the costs.
Legal Raasta , an online web portal which provides more than 100+ legal services has built however an extremely easy-to-use and an intuitive software for GST . However , the founders of LegalRaasta a startup which provides legal services aims at easing the difficulties related to GST by providing many services . Choosing LegalRaasta is beneficial as:
1. It has , 30+ offices in India
2. It has 10+ years experience
3. It helps to save your time
4. There is a cash back guarantee
Some of the services which it provides are :
1. Tax Filing/TDR – GST Registration , GST Return, ITR , TDS Return filing, Business income return , Bulk return filing , Revised return filing , Respond to tax notice
2. Company Formation – Pvt. Ltd., Limited Liability Partnership (LLP) , OPC registration
3. Registrations – DSC, Trademark, Patent , Copyright
It thus also provides many more services .
This article has been contributed by Simmi Setia, Content Writer at LegalRaasta, an online portal for Section 8 Company Registration, Nidhi Company Registration, IEC Registration, Fssai License, File ITR Online, Copyright Registration, Patent Registration, Trademark Registration.
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