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TMI BlogStandard Operating Procedure (SOP)/Directive for post-GST payments of pending bills related to work orders issued during pre-GST period.X X X X Extracts X X X X X X X X Extracts X X X X ..... egime, i.e., VAT regime and the works has completed partly/wholly after the implementation of GST. Hon ble Jharkhand High Court has directed the Government of Jharkhand to issue guidelines on this matter in its order dated 16-03-2021 in WP (T)- 2108/2019. The main issue under consideration is for the payment of pending bills related to work order issued during pre GST period and supply of Works Contract services is executed under GST regime which is discussed as below;- 1. The term Works Contract is defined under sec 2(lxiii) of JVAT Act, 2005 as follows- Works Contract means and includes any agreement for carrying out for cash or deferred payment or other valuable consideration, for assembling, construction, fabrication, erection, installation, modification, fitting out, improvement or repair of any building, road, bridge or commissioning of any other immovable or movable property. 2 . The term Works Contract is defined under sec 2(119) of JGST Act, 2017 as follows- A contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise duty on such goods manufactured. 7 . Keeping in view the difficulties faced and feedback received so far and in compliance to the direction given by the Hon ble High Court of Jharkhand an SOP is being issued in consultation with the departments concerned and after the approval of the Competent Authority. 8. Under the GST tax regime, the rate of GST on Works Contracts for Government work was notified at 18% vide notification no-11/2017,CT(R) dated 28.06.2017. However, the rate of GST on Works Contracts for Government work was reduced to 12% [Notification no. 20/2017- CT (Rate) dated 22.08.2017]. However, vide Notification No. 22/2021,CT (Rate) Dated 31/12/2021, rate has been changed to Services Rate of Tax w.e.f Work contract services provided to Government authorities and Government entity. 18% 01-01-2022 Vide Notification No. 03/2022, Dated 13/07/2022 Services Rate of Tax W.e.f Work contract services provided to central Government, state Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility respectively). Further the ITC of both goods and services are now available. Thus it removes the cascading effect of tax by facilitating seamless flow of credit. The aim of GST is to remove the restrictions of ITC credit in the supply chain. In the GST regime, the input tax credit of IGST, CGST and SGST charged on any supply of goods and/or services used or intended to be used inthe course of furtherance of business is permissible. Works Contractor is eligible to avail ITC credited to his electronic credit ledger on GST portalsubject to conditions prescribed therein. It is also pertinent to mention that under GST regime cross utilization of credit of Goods and Services are available to offset ones liability which was not available during the pre GST regime. ii. It is also important to mention that under GST works contractors are eligible for availing transitional ITC on stock of Goods purchased from 01.07.2016 onwards and declared in the returns filed, by way of filing TRAN-1 and TRAN-2. 11. Payments for Work Contracts The contract price is generally inclusive of all taxes in most of the contracts; these taxes have now been subsumed under GST. In order to arr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... schedule I, II, III and IV to JGST 2017 may be referred to. iv. The same format can be used to compile the information for each ongoing project. The Goods and Services in the various project should be checked and verified by the concerned works department on the basis of bill of quantity, estimate, schedule of rate and other technical specifications. The Pre-GST rate of tax such as Central excise duty/ VAT on materials and service tax on services and post-GST rates (of SGST, IGST, CGST) on supply of works contract should be checked and verified. v. After completion of the said exercise, the costs on account of the subsumed taxes under pre GST and post GST in the particular contract are to be finalized and agreed by concerned state department and Contractor. That is to say the incidence of tax in pre GST and post GST should be calculated that has been factored in the cost of project. The cost so arrived at be compared from theoriginal contract price to arrive at the actual balance of cost of the project i.e. whether there is an increase or decrease in cost of the project. vi. The state work department may receive certification from any accredited agencies/charted accountant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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