TRANSITION OF LONG TERM CONTRACTS UNDER GST
By: – Dr. Sanjiv Agarwal
Goods and Services Tax – GST
Dated:- 14-7-2017
As India migrates to Goods and Services Tax (GST) in near future, as it is likely to, the economy will also move from a closed, multi-tax, non-efficient and non transparent indirect tax regime to a common GST regime which will be more productive, efficient, business friendly and transparent tax regime. All transitions are painful but then, they say, there is no gain without pain.
To migrate from present indirect tax regime to GST regime, a major transition will take place – be it in economy, business, taxation or management front. Over-night, business entities will be made to comply with new tax law which may not be an easy exercise. It becomes a more complex one as multiple taxes will transit to one tax which requires both-transition or migration as well as merger of more than two taxes (18 State and Central taxes get subsumed into one GST which has thr
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input tax credit
141. Transitional provisions relating to job work
142. Miscellaneous transitional provisions
Long term contracts
In case of job works, work contacts, long term or turnkey projects which are carried out over a period of time (not just short term or within a year), there will be transition issues as such projects or contracts will span over both tax regimes, i.e., present tax regime and proposed GST regime.
Such contracts could be for the purpose of –
* Commercial or residential construction contracts
* Erection, commissioning or installation
* EPC contracts
* Turnkey projects
* Management, maintenance and repairs
* Continuous supply of goods and / or services on ongoing basis
In all the above examples, wrong term contracts of works contracts / construction etc shall be subject to relevant transition provisions.
Transitional provisions specifically in respect of long term construction or works contracts provides for treatment of long term construct
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s, section 187 of revised model GST law would apply.
In respect of progressive supply of goods and/or services, wherein tax is charged on happening of either the supply or payment whichever is first, any supply of goods and/or services made in respect of these contracts on or after the appointed day will be dealt with as follows-
* In case consideration, whether in full or part, for such supply of goods and/or services was received before the appointed day, and
* Tax or duty thereon was paid on receipt of such consideration as per earlier law,
no tax would be payable under GST in respect of supply of such goods and/or services.
In case of CGST, consideration can be received in full or in part(s). In case of SGST, there is no condition for receipt of consideration (full or in part) before the appointed day. If supply is made before the appointed day and duty or tax payable thereon has been paid under earlier law, no tax will be payable under GST.
Suggestions
For long term con
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