WORKS CONTRACT IN GST REGIME IN TAMIL NADU
The Goods and Services Tax Act came into for with effect from 1.7.2017
in India.
In the VAT regime assessments were made on the deemed sale value of
goods utilised in works contract besides levy of service tax with 60% abatement
on new works and 30% abatement on repairs.
Compounding scheme option was also available in the earlier regime.
In the GST retime the works contract comes under services. There is no
compound scheme of taxation for works contract in the GST regime.
Under the GST regime, GST (comprising CGST and SGST or IGST) on works
contracts for Government work was initially notified at 18%.
The Central Government has announced reduction of GST from 18% to 12%
with Input Tax Credit in respect of works contract services provided to
Government, local authority or governmental authority and in respect of
post-harvest storage infrastructure for agricultural produce, mechanized food
grain handling system.
There are certain practical difficulties in making payments in respect
of works contracts done by the contractors in the pre GST regime.
In order to complete the works which are
in progress from the pre GST regime and post GST regime, the Government of
Tamil Nadu has directed all government departments and procuring entities shall make ‘on account’ payment of bills presented by
contractors,
restricting the payments to the value due
as
per existing
contract agreements. Any difference on account of final payment due based on the guidelines to be issued and the ‘on account’ payment made as above may be adjusted from out of the 5 percent
amount retained
with the procuring entity. The payment of final bill in cases where on account payments have been made shall be made only after the notification of the guidelines.
The Tamil Nadu
Government’s G.O.Ms.No.264 Finance (Salaries) Department dated 15.9.2017 is given below for ready reference:
GOVERNMENT OF TAMIL NADU
FINANCE [Salaries] DEPARTMENT
G.O.Ms.No.264, Dated 15th September 2017. (Heyvilambi, Aavani-30, Thiruvalluvar Aandu 2048) ABSTRACT
Works Contracts - Payment in Works Contracts Consequent to Introduction of Goods and Service Tax - Orders-Issued.
Read:-
1. The Gazette of India Extraordinary No.12, dated: 12.04.2017.
2. The Gazette of India Extraordinary No.13, dated: 12.04.2017.
3. Tamil Nadu Government Gazette Extraordinary No.189, dated: 23.06.2017.
-oOo-
ORDER:
The Central Goods
and Services
(CGST)
Act 2017, the Integrated Goods and Services (IGST) Act 2017 and the Tamil Nadu Goods and Services (TNGST)
Act 2017 have been enacted and enforced from 01.07.2017.
Consequently, there has been a complete change in the indirect tax system in the Country and in the State of Tamil Nadu.
2. Certain difficulties have arisen
on account of this change of tax regime in Government works contracts. Typically, existing contracts
include clauses stating that
risk arising due to change in law would be borne by procuring entities. However, it
has been
brought to
notice
of the Government that
existing works contracts
in
some
departments do
not provide for such a clause. Introduction of GST
is a major change in tax law. The Government has therefore taken a policy decision
that the risk on account of change of tax law
in
Government works contracts
due to introduction of the GST shall be
borne by
the procuring
entity. The Government accordingly will
notify detailed guidelines
for evaluating
the net change in tax liability on contracts for the purpose of payments to be made to the contractors and entering
into
supplementary agreements with contractors.
3. The Government is also examining the full implications
of the GST on works
contract
and
government
procurement.
The
Public
Works Department
and Highways Department
are
in
the process of revising schedule of rates to separate
out taxes
subsumed under
the
new GST regime from the schedule of rates.
4. In the meanwhile, it has come to the notice of the Government that bills of
existing contractors
are being held up ostensibly due to lack of clarity on the treatment of GST. Delay in payment of bills for part
of works already executed by contractors is likely to result in locking of
their working capital and slowing down of works. There have also been enquiries
and representations
from contractors on non-payment of bills presented by them, apart from seeking compensation for increased tax liability
on account of
implementation of GST.
5. Under the new tax regime, GST (comprising CGST, SGST and IGST) on works contracts for Government
work was initially notified at 18 percent. This had resulted in representations
from contractors of
ongoing works for compensation by procuring entity for increased tax liability
over and above the contracted value of
work. The difficulties arising out of
increased GST on works contracts for Government work was deliberated in the GST
Council Meetings held on 20th August 2017 and 9th September 2017.
Consequently, the GST on works contracts for Government work is
being reduced
to 12 percent. This move more or less balances the taxes on works contracts in the pre GST and post GST regime.
6. Pending notification of guidelines in the matter, the Government now direct
that
all
departments and procuring entities shall make ‘on account’ payment
of bills presented
by contractors, restricting the payments to the value due
as
per existing
contract agreements. Any difference on account of final payment due based on the guidelines to be issued and the ‘on account’ payment made as above may be adjusted from out of the 5 percent
amount retained
with the procuring entity. The payment of final bill in cases where on account payments have been made shall be made only after the notification of the guidelines.
(BY ORDER OF
THE GOVERNOR)
M.A. SIDDIQUE
SECRETARY TO GOVERNMENT (FAC)
To
All Secretaries to Government.
The Secretary, Legislative Assembly, Secretariat, Chennai-9.
The Comptroller, Governor's Household, Raj Bhavan, Chennai-32.
The Governor's Secretariat, Raj Bhavan, Guindy, Chennai-32.
The Governor's Secretariat, Raj Bhavan, Guindy, Chennai-32.
All Heads of Department.
All Collectors / All District Judges / All Chief Judicial Magistrates. All Departments of Secretariat.
The Principal Accountant General(A&E), Chennai-18
The Accountant General (Audit-1), Chennai-35.
The Accountant General (Audit-II), Chennai-6.
The Accountant General (CAB), Chennai-9.
The Accountant General (Audit-II), Chennai-6.
The Accountant General (CAB), Chennai-9.
The Principal Secretary/Commissioner of Treasuries and Accounts, Chennai-15. All Pay and Accounts Officers/All Treasury Officers.
The Chairman,
Tamil Nadu Public Service Commission,
Chennai-3.
The Registrar, High Court, Chennai-104.
The Registrar, High Court, Chennai-104.
The Registrars of all Universities.
All State Owned Corporations and Statutory Boards. All State Public Sector Undertakings.
All State Owned Corporations and Statutory Boards. All State Public Sector Undertakings.
All Co-operative Federations.
All Autonomous Bodies.
All Autonomous Bodies.
All Panchayat Unions / Municipalities / Town Panchayats.
The Commissioner, Corporations of Chennai /Madurai /Coimbatore / Tiruchirappalli / Salem / Tirunelveli / Erode / Tiruppur / Vellore / Thoothukudi.
Copy to:
The Senior Principal Private Secretary to the Additional Chief Secretary
to
Government, Finance Department, Chennai-9.
All Sections in Finance Department, Chennai-9.
Stock File / Spare Copies.
All Sections in Finance Department, Chennai-9.
Stock File / Spare Copies.
-/ Forwarded : By
Order /-
SECTION OFFICER
PLEASE USE SOCIAL MEDIA BUTTONS TO SHARE
THE BLOGSPOT ARTICLES
PLEASE USE SOCIAL MEDIA BUTTONS TO PRINT
THE ARTICLES IF NEEDED
HOW TO USE:
Please click + Button on
the left side social media buttons of this blogspot. A new window with more
options will appear and click load more and then choose Print Friendly option
and click. The article appears without side banners and heading and footer.
Take print out of the “ABHIVIRTHI” articles needed if necessary and use
minimum number of papers and save money. Similar procedure may be followed to
take print out other articles also.
ABHIVIRTHI
|