Goods and Services Tax – GST – By: – Vatsalya Bhardwaj – Dated:- 4-3-2017 Last Replied Date:- 6-3-2017 – Levy of taxes in case of composite contracts is a complex phenomenon. Most specifically, levy of tax on works contract has witnessed a plethora of cases. Specifically the chargeability of tax on service vis-à-vis goods has always been a matter of discussion before the courts in the present indirect tax regime. The courts have also taken different-different views and always the matter is being subject matter of confusion / litigations. However, with the introduction of GST it was expected that things will ease and long litigations under Works Contract will end and a definite law would be there. But the reality is far away from our expectations. Issues became more complicated, taxability is again under question and definitions are quite ambiguous. Let s first recall how VAT and Service Tax Laws explained Works Contract in their respective laws. Works Contract as per various St
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
greement for carrying out for cash, deferred payment or other valuable consideration, building, construction, fabrication, erection, installation, fitting out, improvement, modification, repair, renovation or commissioning of any moveable or immovable property; In Revised Model GST Law vide, Section 2(110) works contract has been defined as under:- Works contract means a contract wherein transfer of property in goods is involved in the execution of such contract and includes contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property. On comparison of aforesaid definitions in GST Law it can be noted that word movable property is deleted from the definition of works contract under revised Model GST Law. However, it was covered under the Model GST Law. That shows it has been intentionally deleted. Can this be suggested that movable prope
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ng the aforesaid definitions our question is where will repair or maintenance of movable and immovable property will be covered? Will it be a composite supply of goods and services naturally bundled with each other i.e. to say in Repair and maintenance work, goods and services of labour are naturally bundled and supplied together for the purpose of execution of a contract and if not here, then will it be covered under the definition of works contract given under revised Model GST law, that covers transfer in property in goods in execution of such contract and includes repair and maintenance of any immovable property. Now the word includes also leaves the definition as an open vault that may include other terms as well as against the earlier definition of works contract under GST Law which started with means and ended after including both movable and immovable properties. Now firstly it will be strenuous task for the tax professionals to advice their clients that whether it will be a co
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
pply of services the dealer pay the necessary tax under GST on raising the invoice or receipt of payment. During the course of assessment proceedings the A.O. may call for details of material used in each of AMC and may take a view that in the cases where substantial material has been used same have to be considered as predominantly for supply of goods and not for services. For example, in case the company has entered into 100 contracts for AMC and has considered the same as contract for supply of services and subsequently the A.O. finds that in, say, 25 contracts the value of material used in rendering services was quite substantial as compared to price charged for AMC, he may take a view that these 25 contracts have to be considered as predominantly supply of material and on the same since rate of tax may be different the A.O. can raise additional demand. Accordingly, this will give a litigation and ambiguity in implementation of law. Case 2- Consideration as works contract. In case
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
to litigation. Though, it can be expected that the Government is in the process of further amending the revised Model GST Law and coming out with relevant rules. It is believed that while making further amendments or while drafting rules they will take care of such issues. – Reply By Ganeshan Kalyani – The Reply = Nice Article. In my view works contract is considered as service under GST. In such case why department should term it as composite supply. Composite supply is different from the term works contract service. Hence there should not be much differences.Thanks – Reply By Vatsalya Bhardwaj – The Reply = Sir,Thank you for your views and appreciation. The purpose of this article is to understand why the word 'movable property' has been deleted from the definition of 'works contract' under Revised Model GST Law and if it has been intentionally deleted then whether the work executed in relation to movable property will be covered under Works contract? Secondly, compo
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =