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FAQ on GST in respect of Construction of Residential Complex by Builders/Developers.

S No. Questions Answers
1
 
Whether sale of a Flat / House by a builder / developer is a supply of a service or a sale of immovable property under GST law?
As per the clause 5(b) of the Schedule II of CGST, Act, 2017, construction of a flat / house / complex intended for sale is a supply of service. However, if the entire consideration towards the Flat/House/complex is received after the receipt of completion/occupancy certificate from the competent authority or after its first occupation, whichever is earlier, then such activity is neither a supply goods nor a supply of Service, as provided under Clause 5 of Schedule-III of CGST Act, 2017. Accordingly, a transaction involving sale of such immovable property after initial occupation or after receipt of occupancy certificate, is a sale of immovable property and it does not attract GST.
2
 
Is there any levy of GST on sale of Land?
The sale of “Land” (being an immovable property, which is neither Goods nor Service as per GST law) does not attract GST, as provided under Clause 5 of schedule III of the CGST Act, 2017
3
What is the applicable rate of GST in respect of supply of services relating to construction of residential Complex?
 As per Sl. No. 3(i) of Notification No. 11/2017-CT (Rate) dated 28.06.2017 construction of residential complex attracts GST @18% [CGST @ 9% and SGST @ 9%] {which includes construction of complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier}. However, as the supply of service in relation to construction of Flat/House/Complex also involves transfer of “land/undivided share of land” which do not attract GST, the value of such land/undivided share of land shall be deemed to be 1/3rd of the total amount charged for such supply, as provided in Para 2 of the said Nfn. No:11/2017-CT ( R) dt: 28.06.2017. This implies that GST on a Flat/House/Complex [for which a part or total consideration is received prior to issue of a completion/occupancy certificate or it‟s first occupancy, whichever is earlier], shall be 2/3rd of the total consideration charged for such supply (thus GST payable on a Flat/House/Complex would works out to be 12% of the total consideration inclusive of the value of land/ undivided share of land).
4
 
What are all the exemptions available under GST provisions in respect of supply of „Construction Services” in relation to residential/commercial complex?
The following exemptions are available to the construction services, under GST law:

Description of services Authority

Services provided by way of pure labour contracts of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works pertaining to the beneficiary-led individual house construction or enhancement under the Housing for All (Urban) Mission or Pradhan Mantri Awas Yojana.

Sl. No. 10 of Not. No. 12/2017-CT (Rate) dated 28.06.2017

Services by way of pure labour contracts of construction, erection, commissioning, or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex.

Sl. No. 11 of Not. No. 12/2017-CT (Rate) dated 28.06.2017

Accordingly, the services of construction of residential complexes (without material) under the above specified Government schemes or construction of single residential unit other than as a part of a residential complex (without material) are exempted from GST. Apart from the above, the services rendered by the departments of the Central/State Governments, Union Territories and local authorities (E.g.: CPWD or State PWD) to other Central/State Governments, Union Territories and local authorities (Recipients) are fully exempted as per Entry No. 8 of Notification. No. 12/2017-CT (Rate) dated 28.06.2017.
5
 
Whether Input Tax Credit is available on goods/inputs (Viz., sand, gravel, steel items, cement etc.) and input services (Viz: Designing, Plan drawing, site preparation, construction etc.) used in provisioning the construction service?
The builders/developers are entitled to avail credit on the goods (i.e. inputs as well as capital goods) and input- services used or intended to be used in the course or furtherance of their business, subject to the conditions provided in Section 16 read with Section 17(5) of the CGST Act, 2017. Accordingly Builders/Developers are eligible to avail ITC of the GST paid on goods viz., inputs like: sand, Gravel, Cement, steel, electrical cables, switches etc.; and Capital Equipment like: Mixer, Crane etc.; and input-services Viz: Architectural services like Designing, drawing etc.; Manpower Supply Service etc. Further, GST paid on sub-contracted construction services (with or without material) by other (sub-)contractors (suppliers) to whom certain construction services are outsourced, is also available as ITC as the same do not fall under clauses (c) and (d) of Section 17(5) of CGST Act, 2017. The sub-contractors are independent taxable persons as per GST law.
6
 
Whether Input Tax Credit is allowed on Tippers, Dumpers and JCBs used in connection with supply of construction Services in view of the exclusion clause at Sec. 17(5) (a) of the CGST Act, 2017?
In terms of Sec. 17(5) (a)(ii) of the CGST Act, 2017, Input Tax Credit is allowed on Tippers and Dumpers which qualify as Motor Vehicles (under Clause (28) of Section 2 of the Motor Vehicle Act, 1988 read with Section 2(76) of the CGST Act, 2017) used for transportation of goods. Thus, the restrictions envisaged under Section 17(5)(a) ibid is not applicable in respect of Tippers, Dumpers & JCBs; and as such Input Tax Credit of GST paid on them, is admissible.
7
 
 
Whether GST is leviable on stock transfer of inputs and capital equipment from one site to another site of the same builder, within or across a state?
Transfer of inputs or capital equipment of the builder/developer from one location to another location within a state for undertaking construction activity under the same registration, is not a taxable supply; hence such transfer can be made without payment of GST; and under a delivery challan. It may be noted that the builder/ developer who is not required to take registration in a different state (providing inter-state supplies and not having a place of business in the other state); and is required to transfer his capital equipment or inputs, is not liable to pay GST; hence such capital equipment or inputs can be transferred under a delivery challan. However, in terms of the Section 25(4) of the CGST Act, 2017, a person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory, shall, in respect of each such registration, be treated as distinct persons for the purposes of GST. Further, as per clause 2 of Schedule-I to the CGST Act, 2017 supplies between such distinct persons, even without consideration, are taxable supplies. Accordingly, in a case where the builder/developer having two different registrations for different braches/ sites with in a state/UT or in different states/UTs, then they are two distinct persons for GST; therefore, transfer of inputs/capital equipment between them would be treated as a taxable supply; and hence attract GST. However, GST paid on such supplies can be taken as Input Tax Credit by the recipient. The valuation of such supplies of shall be as per provisions of Sections 15 and 18(6) of CGST Act, 2017 read with Rule 28 of CGST Rules, 2017.
8
 
 
What are the consequence under GST law if the builder avails ITC on inputs/input services used by the builders/developers for construction of flats out of which certain flats are sold on payment of GST and remaining sold without payment of GST (when the same are sold and entire sale consideration is received consequent to issuance of completion certificate)?
In terms of the provisions of Section 17(2) of the CGST Act, 2017, where the goods or services or both are used by the registered person partly for effecting taxable supplies and partly for effecting exempt supplies, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies. Further, sale of flats after issuance of completion certificate without payment of GST in terms of clause 5 of schedule-III to CGST Act are exempt supplies for the purpose of Section 17(2) ibid as specified vide Section 17(3) ibid, read with clause (b) of paragraph 5 of Schedule II and clause 5 of schedule III to the CGST Act, 2017.
In view of the above, Input Tax Credit in the above mentioned situation would be restricted to the amount as is attributable to the taxable supplies (flats on which GST is liable to be paid). The method of attribution of eligible ITC has been prescribed under the provisions of Rules 42 (for inputs and input services) and Rule 43 (for capital goods) of the CGST Rules, 2017.
9
 
 
Whether refund of accumulated input tax credit on account of invert duty structure, if any, is allowed?
No. As per Notification No. 15/2017-CT (Rate) dated 28.06.2017 issued under the provisions of Section 54(3) of the CGST Act, 2017, refund of un-utilised input tax credit is not allowed in respect of the construction services covered under clause 5(b) of schedule-II to CGST Act, 2107.
10
 
 
Whether Credit of duties/taxes paid on the inputs lying in stock as on the appointed day i.e. 01.07.2017 is allowed in respect of residential/commercial complexes which are under construction as on 1.7.2017?
In terms of Section 140(3) of the CGST Act, 2017, credit of eligible duties is allowed to the suppliers of construction services (builders/developers who were availing abatement in terms of Notification. No. 26/2012-ST dated 20th June, 2012) in respect of the inputs lying in stock as on 01.07.2017 provided that:
(i) such inputs or goods are intended to be used for making taxable supplies;
(ii) the said registered person is eligible for input tax credit on such inputs;
(iii) the said registered person is in possession of invoice or other prescribed documents evidencing payment of duty under CENVAT Credit Rules, 2004, in respect of such inputs; and
(iv) such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day i.e., 1.7.2017.
11
 
Whether the builders/developers are liable to pay tax again under GST in cases where the Service Tax had already been paid/payable on flats, as per earlier law?
No. In terms of Section 142 (11) (b) of the CGST Act, 2017, GST is not payable to the extent of the Service Tax was paid / payable under the provisions of chapter-V of the Finance Act, 1994. Nevertheless, the leviability of Service Tax on the subject services shall be determined by applying the Point of Taxation Rules 2011 as per which if services have been provided or deemed to have been provided on or before 30.06.2017, no GST is payable on the same.
12
 
 
Whether GST is payable on „additional charges‟ collected by the builder/developer, for modifications suggested by the buyers?
Builders/developers often charges extra amounts for providing certain additional / customised facilities / services which are like „internal/external modification (as suggested by the buyers)‟, wood-work, special - plumbing fixtures / sanitary fittings; „power backup‟, etc.(additional services). If such consideration is in respect of the additional services provided before the first occupation or before the receipt of occupancy certificate, the additional charges will form a part of the transactional value or total consideration for the supply of the construction service; and hence GST is payable on such additional charges at the rate as applicable to the subject construction service i.e: 18% on 2/3rd of the total consideration (1/3rd being the abatement permissible). If the consideration is towards the „internal/external modification (as suggested by the buyers)‟, wood-work, special – plumbing fixtures / sanitary fittings; „power backup‟, etc. (additional services), which is undertaken after the first occupation or receipt of the occupancy certificate, such additional consideration would not be treated as a part of the construction service. In such case the additional charges would be treated as towards an independent works contract service, which is distinct from the initial construction of residential complex service. Thus, such additional charges would attract GST @ 18%, without any abatement from the value.
13
 
Whether „other charges‟ collected by the builders/developers towards „prime/preferential location‟, „parking facility‟, „firefighting installation‟ etc. can be deducted from the total consideration for payment of GST ?
 
Charges towards „preferential location/floor/facing‟, „parking facility‟, „firefighting installation‟, „transformer‟, “Gen-set facility” etc., collected by the builders/developers also attract GST as applicable to the principal supply (construction service)as they are naturally bundled and supplied in conjunction with the construction service. Therefore, GST at the rate of 18% on 2/3rd of the Value for such naturally bundled services is payable on the said charges also.
14
 
Whether the builders/developers providing construction services are eligible for “Composition Scheme”?
No. Provisions of composition levy as envisaged under Section 10 of the CGST Act, 2017 are not applicable to supply of services (except supply of restaurant services).
15
 
Please clarify as to whether Service Tax or GST is payable in respect of on-going projects, for which neither occupancy certificate was received nor it is yet to be occupied, as on the appointed date i.e. 01.07.2017?
The Sec. 142(10) and 142(11) of the CGST Act, 2017 provides for the provisions to deal with the liability towards the ongoing projects. These provisions are explained with reference to the following possible situations:-

(i) when the total consideration was received prior to 30.06.2017 from the customers in respect of the property under construction (for which neither occupancy certificate was received nor it is yet to be occupied) - Service tax is/was payable on the consideration received @15% on 1/4th of the consideration; and there would be no GST on the same. ( Sec. 142(11)(b)- refers);
(ii) when a part of the consideration was received prior to 30.06.2017 from the customers in respect of the property under construction (for which neither occupancy certificate was received nor it is yet to be occupied) - Service tax (ST) is/was payable on the consideration received prior to 01.07.2017 i.e.: @15% on 1/4th of the consideration; and there would be no GST to the extent of that amount for which ST was paid/payable. For the remaining consideration paid/payable on or after 01.07.2017, GST is payable with reference to the date of payment of the balance amount or the date of invoice issued by the builder, whichever is earlier (generally invoice reckons to the payment milestones as per the agreement between the builder/developer and the buyer).
(iii) In respect of an ongoing construction project(for which neither occupancy certificate was received nor it is yet to be occupied), when the milestone for payment was achieved by the builder/developer, who raised an invoice within 30 days from the same(as required by law) prior to 30.06.2017, but the payment is received from the customers in respect of the said invoice on or after 01.07.2017, - Service tax is/was payable on the consideration so received @15% on 1/4th of the consideration; and there would be no GST to that extent. On the balance amount payable or paid w.r.t the subsequent payment milestones falling on or after 01.07.2017, GST is payable, as mentioned at (ii) above.
(iv) when the total consideration is received, as per the agreed terms, on or after 01.07.2017 from the customers in respect of a property under construction (for which neither occupancy certificate was received nor it is yet to be occupied) - GST is payable @ 18%, on 2/3rds of the consideration.
16
 
Whether GST is payable on the owner‟s share of the flats/houses/portion of the building constructed by the builder/developer and given to the land owner as per the development agreement?
The builder/developer is liable to pay GST even on the share of the land owner and given in lieu of the land received for the development, besides GST on the builder/developer‟s share of the complex/building. In the above transaction, the builder/developer receives consideration for the construction service provided by him, from two categories of service receivers: (a) from landowner: in the form of land/development rights; and (b) from other buyers: normally in cash. Thus the builder is liable to pay GST not only on his portion of the complex/building, but also on the share of the land owner.
17
 
If the answer to above query is „yes‟, then when the GST is liable to be paid; and what should be the taxable value?
As stated in the answer to the preceding question, GST is liable to be paid by the builder/developer on the share of the land owner, also. GST is liable to be paid when the possession or right in the property of the said flats are transferred to the land owner by entering into a „conveyance deed‟ or similar instrument (e.g. allotment letter). The value of the „flats/portion of the building‟ supplied to the land owner by the developer/builder has to be determined under the provisions of Section 15 of the CGST Act, 2017 read with Rules governing Valuation as envisaged under Rules 27 to 35 of the CGST Rules, 2017. In terms of Rule 27 of CGST Rules, 2017, where the supply of goods or services is for a consideration not wholly in money, the value of the supply shall: (a) be the open market value of such supply; (b) if the open market value is not available under clause (a), be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money, if such amount is known at the time of supply; (c) if the value of supply is not determinable under clause (a) or clause (b), be the value of supply of goods or services or both of like kind and quality; In view of the above provisions, the value of supply of those flats would be equal to the value of similar flats charged by the builder/developer from the buyers of his share of flats. In case the prices of flats/houses undergo a change over the period of sale (from the first sale of flat/house in the residential complex to the last sale of the flat/house), the value of similar flats as are sold nearer to the date on which land is being made available for construction should be used for arriving at the value for the purpose of tax.
18
 
 
Whether Layout Charges/ Development Charges, plotting Charges /conversion charges collected by the Municipal/panchayat authorities from the builders/developers attract GST under reverse charge?
As per the entry at Sl. No. 4 of Notification no.12/2017-CT(R) the services by Central Government, State Government, Union Territory, Local Authority or Governmental Authority by way of any activity in relation to any function entrusted to a municipality under Article 243 W of the Constitution, are exempted. "Regulation of land-use and construction of buildings" is listed as one of the functions entrusted to Municipality at Sl.No. (b) of 12th schedule under Art. 243W of the Constitution. Since the subject Layout Charges/ Development Charges; plotting / land conversion charges, are collected under the authority of the respective state legislation, in relation to the said functions under Art. 243W, the said charges for the concerned services are exempted under sl.no.4 of Notification No. 12/2017-CT (R) dtd: 28.06.2017. Hence, such charges collected by municipality/town planning/ Revenue authorities, including HMDA, VUDA etc., GST is not liable to be paid, since the such charges are collected for the services in relation to the functions under Art. 243W of the Indian Constitution.
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1. Vide Circular No. GujRERA/CIR/81  Date 26/09/2017 - Relaxation has been given to the public authorities engaged in doing real estate projects which have their finance departments headed by officers with differing designations such as Finance Controller, Finance Officer, Chief Accounts Officer etc. Such Finance heads of the government authorities by virtue of their designation shall be competent to issue certificates as per Form 3 and Form 5 in lieu of Chartered Accountants for the purpose of regulation under GujRERA including matters connected therewith and incidental thereto.  
 
2. Vide Circular No. GujRERA/CIR/43  Dated 16/09/2017 - Promotors have been adviced to take proper precautions while mentioning the project completion date. That is the date of completion shall take into account the period of completion of construction, obtaining occupancy certificate from the authority, conveyance of the apartment and the common areas etc.
 
3. Vide Order No. 1 dated 19/09/2017, the RERA authority has stated that the Promoter/Developer who do not apply for the registration of their ongoing projects before 1/10/2017 will be required to pay a registration fee and a penalty equivalent to the registration fee for applications during the period from 1/10/2017 to 31/10/2017. From 1/11/2017 to 30/11/2017, the amount to be paid at the time of registration would be the registration fee plus two times registration fee as a penalty. This would not in any way reduce the element of liability in the event of other defaults including intentional delay in registration, false representation etc. For every application made on or after 1/10/2017, the promoters shall furnish a letter giving the details of reasons for the delay in the registration based on which Authority would be free to take a view on the liability.
 
4. Application forms for Refund of Registration fees (paid for projects outside the planning area) and change of registration forms have been released.
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2017-VIL-846-CESTAT-DEL-CE
M/s DLF PROJECTS LTD Vs CCE, DELHI


Central Excise – dutiability of “Ready-Mix-Concrete” manufactured at construction site – admissibility to benefit of exemption notification no. 04/2006-CE – denial of exemption on the ground that RMC and concrete mix are entirely different products - duty demand and penalties extended period of limitation

HELD – The appellant is not disputing the fact that the goods manufactured by them were in fact “Ready-Mix-Concrete”. They have claimed that since such goods have been used in construction work at such site, the benefit of notification will be entitled to them - the Adjudicating Authority after considering the process of manufacture, in the light of the observation of Apex Court in L&T case, has concluded that the goods are in fact “Ready-Mix-Concrete” and not entitled to the benefit of the exemption - the issue of entitlement of “Ready-Mix-Concrete” manufactured at site of construction to the benefit of Notification No. 4/2006 is no longer res integra and stands decided against the assessee by the Apex Court. Consequently, duty demands are required to be upheld - the extended period of limitation is rightly invoked in the present case – assessee appeals are dismissed 

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2017-VIL-515-GUJ-CE
ASSISTANT COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX Vs VODAFONE
ESSAR GUJARAT LIMITED


Central Excise - Cenvat credit on parts used for construction of fixed and semi-fixed structures - assessee availed cenvat credit on inputs viz. angles, channels, beams etc. which were used in construction of towers and in tower materials, pre-fabricated buildings/shelters - Tribunal by the impugned confirmed the demand but deleted the penalty – Revenue in appeal

HELD - When the assessee bona-fide carrying a belief which cannot be stated to be wholly untenable that cenvat credit on such inputs was available, claimed the same with full knowledge of the department, merely because eventually such credit was disallowed, would not give rise to penalty proceedings - The reference to credit being wrongly taken or without taking reasonable steps would have an element of totally wrong or malicious claim. If the credit is claimed bona-fide and the belief that such cenvat credit was available is a reasonable belief, penalty under the said rule would not be imposed - It is not compulsory to impose penalty the moment cenvat credit is disallowed – revenue appeal is dismissed

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GOVERNMENT OF ASSAM

OFFICE OF THE COMMISSIONER OF TAXES

 

Dispur: 24.08.2017

 

CIRCULAR No. 3/2017-GST

No. CT/GST-10/2017/194.—Everyone is aware that Goods and Services Tax (GST) has been introduced in Assam with rest of the country with effect from1st July, 2017replacingAssam Value Added Tax Act, 2003 which was in forceupto30th June,2017. GST has two components: State GST levied and collected by the State and CentralGST levied and collected by the centre and these two components of GST i.e. SGST and CGST would be applicable on all intra-State (within the State) supplies of goods and services on the same taxable value of such supply.However, the inter-Statesupplies of goods and /or services would attract Integrated Goods and Services Tax (IGST) levied and collected by the Centre.

Under the old VAT law, the drawing & Disbursing Officers (DDOs) of various Central and state government departments and establishments were required to deduct tax at source in respect of conventional sale/supply of goods, execution of works contract and lease transactions.

Post introduction of GST, umpteen numbers of queries have been received from Drawing & Disbursing Officers (DDOs) of various Central and State Government departments and establishments regarding the applicability of the provision of deduction of tax at source (TDS)in respect of pre-existing contracts/supplies as well as contracts/suppliers executed after introduction of GST.

 

The matter is examined at length. Since provision of TDSapplies to execution, of works contract as well as to supply of goods and it is deemed appropriate to issue following clarifications broadly under two heads:

(A)  WORKS CONTRACT:

A "works contract" involves the transfer of property and also an element of service or work rendered.That is why it is called composite contract.

It is pertinent to make a brief reference to the legal position under the old AssamVAT Act vis-à-vis GST Act.

Provisions under the old Assam VAT Act:

As per provision of section 18 of the Assam VAT Act, the time of sale of goods was the earliest of the following,-

(a)  date of issue of the tax invoice;

(b)  date of receipt of payment, in full or in part;

(c)  transfer of title or possession of the goods or incorporation of the goods in the course of execution of any works contract.

It is settled position of law that "Taxable event is the transfers of property in goods involved in the execution of works contract and the said transfer of property in such goods takes place when the goods are incorporated in the works."

There were two methods of taxation of works contract under VAT.

A contractor (having TIN) could pay 15% tax on the taxable turnover of goods, that is, after excluding labour component and other prescribed deductions from gross turnover which is the composite price consideration for both material and labour component.

Alternatively, a contractor could opt for composition scheme (by registering under GRN) and pay 5% lump sum tax on the entire/gross value of works contract without any deduction for labour and other charges.

Section 47(1) of the Assam VAT Act provides for deduction of tax at source by every person under the control of Government while making any payment for execution of a work contract, as per the rates specified in the fifth Schedule appended to the vat Act. The rate of TDSwaseither 15% in case the contractor was under TIN or 5% in case the contractor was under composition scheme (GRN), as mentioned above.

Provisions under the GST act:

Under GST also, though a works contract is considered as composite supply, however, it is deemed to be a supply of services by virtue of entry 6(a) of Schedule II of the Assam GST Act,2017.

As per serial number 3of the Notification No. 11 (as amended), the value of a works contracts executed for Government Department/establishment shall be taxable at combined GST rate of12% (6% CGST and 6% SGST in case of intra-State works contract) or 12% IGST (in case of inter-State works contract).

Section 51of the Assam GST/CGST Act and section 20 of the IGST Act, requires every department or establishment of the State Government or central Government or local authority or government Agencies to deduct SGST at 1% and CGST at 1% in case of intra-State supply or IGST at 2% in case of inter-State supply from the payments to be made or credited to the supplier of taxable goods or services or both, where total value of such supply, under the contract exceeds two lakhs fifty thousand rupees.

It is important to note that even where the running payment made is less than Rs. 2.5lakh but if the total contract/supply value is more than Rs. 2.5 lakh, the provision of TDS under GSTshall apply to such payment.

The transitional provision containing in section 142(13) of the AssamGST Act, 2017 lays down that where a supplier has made any sale of goods in respect of which tax was required to be deducted at source under the Assam ValueAdded Tax Act, 2003 and has

also issued an invoice for the same before the introduction of GST i.e. before 01/07/2017, no deduction of tax at source under section 51 of the GST Act shall be made by the deduct or under the said section where payment to the said supplier is made on or after the appointed day i.e. 01/07/2017.

Now in the light of the above provisions, the matters relating to TDS in respect of work contract has been examined and following clarifications are issued:

(a)  WorksContractexecuted up to 30/06/2017 and the bills/invoices etc. also have been raised onorbefore30/06/2017 (during VAT period) but the payment is pending or made on or after 01/07/2017:

In respect of such payment, deduction of tax at source will be made as per the provisions of section47(1) of the Assam VAT Act. The applicable tax rate shall either be15% of taxable turnover or 5% of the gross turnover, as already mentioned above.

Provisions of deduction of tax at source (TDS) under the Assam GST Act, 2017shall does not apply to such cases [section 142(13)].

(b)  WorksContractexecuted upto 30/06/2017 but bills/invoices etc. have been raised on or after 01/07/2017 (during GST period) and the payment is also pending or made on orafter01/07/2017:

In respect of such payment, deduction of tax at source will be made as per the provisions of section51of the Assam GST Act, 2017sincetwoevents i.e., raising of invoice and payment of supply arise under the GST regime and the transaction was not accounted for under VAT. The applicable rate for deduction of tax at source (TDS) shall be: SGST 1% and CGST at 1% in cases of intra-State supply or IGST at 2% in case of inter-Statesupply.

Such contractor shall, however, remain liable to pay balance tax, as per the rates of tax applicable under GST law.

Provisions of deduction of tax at source (TDS) under the Assam VAT Act, 2003shall does not apply to such cases.

(c)  WorksContractpartially executed on or before30/06/2017 (during VAT period)and the balance works being executed on orafter01/07/2017 (during GST regime):

In case of works contract, which were partially executed on or before 30/06/2017(during VAT period), there can be two situations:

(i)  Bills/invoices were raised before GST: TDS will be made as per provision of the vat Act, as mentioned in para (a) above.

(ii)  Bills/invoices were raised after GST: TDS will be made as per provision of the GST Act, as mentioned in para (b)above.

In case of works contract, which are partially executed on or after01/07/2017 (during GST period) and invoices are raised during GST regime and payments are received during GSTperiod, since the transaction was not accounted for under VAT, TDS will be made as per provision of the GST Act, as mentioned in para (b) above.

(B)  SUPPLY OF GOODS /SERVICES: Provisions under the old Assam VAT Act:

Section 47(3) of the Assam VAT Act provides for deduction of tax at source by every person under the control of Government while making any payment in respect of the supply of taxable goods, at the rates specified in the schedules appended to the VAT Act.

Second Schedule provides for 6% taxable goods and Fifth Schedule provides for15% tax rate for unclassified or residuary goods not specified elsewhere.

Provisions under the GST act:

As mentioned in Para (A), section 51 of the Assam GST/CGST Act and section 20 of the IGSTrequires every State /Central Government department or establishment or local Authority or Government Agencies to deduct SGST at 1% and CGST at 1% in case of intra-State supply or IGST at 2% in case of inter-State supply from the payments to be made to the supplier of taxable goods or services or both, where total value of such supply, under the contract, exceeds two lakhs fifty thousand rupees.

At the cost of repetition, it is mentioned that even where the running payment made is less than Rs. 2.5 lakh but if the total contract/supply value is more than Rs. 2.5lakh, the provision of TDS under GST shall apply to such payment.

The transitional provision as laid down in section 142(13) of the Assam GST Act, 2017 provides that where supply of goods was made during VAT regime and also the invoice for the same was issued during VAT period i.e. on or before 30/06/2017, but payment to the supplier is made on or after the date of introduction of GST i.e. on or after 01/07/2017, no deduction of tax at source(TDS) under section 51 of the GST Act shall be made by the deductor.

Now in the light of the above provisions, the matters relating to TDSon supply of goods or service has been examined and following clarifications are issued:

(a)   ) Supply of goods made upto 30/06/2017 and the bills/invoices etc. also have been raised onorbefore30/06/2017 (during VAT period) but the payment is pending or made on or after 01/07/2017: 

In respect of such payment, deduction of tax at source will be made as per the provisions of section47(3) of the Assam VAT Act at the rates specified in the Schedules appended to the vat Act.

It may be mentioned that Second Schedule provides for 6% taxable goods (w.e.f. 4/7/2016prior to which the tax rate was 5% since 31/10/2009) and Fifth Schedule provides for 15% tax rate(w.e.f. 10/8/2016 prior to which the tax rate was 14.5% since 13/9/2013) for unclassified or residuary goods not specified elsewhere.

Provisions of deduction of tax at source (TDS)under the Assam GST Act, 2017shall does not apply to such cases [section 142(13)].

(b)   Supply of goods made upto 30/06/2017 etc but bills/invoices etc. have been raised on or after 01/07/2017 (during GST period) and the payment is also pending or made on orafter01/07/2017:

In respect of such payment, deduction of tax at source will be made as per the provisions of section51of the Assam GST Act, 2017sincetwoevents i.e., raising of invoice and payment of supply arise under the GST regime and the transaction was not accounted for under VAT.

The applicable rate for deduction of tax at source (TDS) shall be: SGST 1% and CGST at 1% in case of intra-State supply or IGST at 2% in case of inter-State supply.

The supplier of goods or services shall, however, remain liable to pay balance tax, as per the rates of tax applicable under GST law.

Provisions of deduction of tax at source (TDS)under the Assam VAT Act, 2003shall does not apply to such cases.

(c)   Supply of goods partially madeonorbefore30/06/2017 (during VAT period) and partially made on or after 01/07/2017 (during GSTregime):

In case of supplies of goods, which were partially made on or before 30/06/2017(during VAT period), there can be two situations:

(i)  Bills/invoices were raised before GST: TDS will be made as per provision of the vat Act, as mentioned in para (a) above relating to the supply of goods or services.

(ii)  Bills/invoices were raised after GST: TDS will be made as per provision of the GST Act, as mentioned in para (b) above-relating to supply of goods or services.

In case of supplies partially made on or after 01/07/2017(during GST regime), and invoices are raised during GST regime and payments are received during GSTperiod, TDS will be made as per provision of the GST Act, as mentioned in para (b) above, relating to the supply of goods or services.

(d)   Supply of goods and or services during post-GST regime i.e. on or after 01-07-2017:

In case of supplies of goods or services, which are exclusively made on or after 01-07-2017(during GST period) and invoices/bills are also raised during GST period, TDS will be made as per provision of the GST Act, as mentioned in para(b) above, relating to supply of goods or services.

Certain Government services are exempted under GST. In this regard, GST RateNotification No.12/2017 and 21/2017 may be referred to which are available atwww.tax.assam.gov.in and at www.cbec.gov.in

However, the provision relating to TDS under GST Law is put on hold for the time being and the same will be brought into force from a date which will be notified later.

This Circular is clarificatory in nature and not meant for any interpretation of provisions of the act and rules.

 

Anurag Goel,

Commissioner of State tax

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The Karnataka StateChartered Accountants Association (KCAA) has sent a memorandum to the Revenue Secretary Hasmukh Adhia, highlighting the issue faced by the tax payers and practitioners in filing returns under the Goods and Services Tax (GST) laws.

 

In the Memorandum the Association has raised following issues:

Pressing Issues:

 

  1.   Scheduled downtime on e-filing website:

The GSTR 3B is required to be filed by 20th Aug for the July transactions. On a pan India basis, people are uploading and paying taxes, which is expected to have issues relating to access traffic. As far as the present going is concerned, we find that the test run has been insufficient.A gesture of proactiveness to extend the due date and quick communication to such effect is immediate pressing need of the hour and also, quick redressal and overhaul of the infrastructure so as to not have such issues recurring is highly helpful.

2.  The timeline for filing Form GST TRAN-1 for claiming transitional input-tax credit is 90 days from the appointed day i.e.30th September 2017. However, recent notification No.23/2017 – Central Tax dated 17th August 2017 curtails this due date to 28th August 2017.

Rule 117 of the CGST Rules, 2017entitles every registered person to avail credit of input tax under Section 140within 90 days of the appointed day by submitting a declaration electronically in Form GST TRAN-1. However, the recent notification no. 23/2017– Central Taxdated 17th August 2017 which specifies registered persons who wish to avail input tax credit in terms of Section 140 by filing Form GST TRAN-1, should complete the electronic filing of both GST TRAN-1 and GSTR-3B by 28th August 2017 to avail the transitional credit offset, is contradictory to the provisions of Section 140 read with Rule 117 of the CGST Rules under which this notification is issued. It is causing significant distress to various stakeholders as the form is still not made available for e-filing. This is a classic situation of notification by passing the legal mandate.

3.  Clarity on the claim of ITC flowing from GST TRANS-1.

There are situations where few assessees have already filed the GSTR- 3B immediately after the release of the said form in the second week of August and before the issuance of the notification No.23/2017-Central Tax clarifying the filing of GST TRAN-1 & GSTR-3B. Further, few assessees who might have filed their returns without claiming ITC as GST TRAN-1 is yet to be released and in the light of the statutory mandate that ITC has to flow from GST TRANS-1and due date for filing is 90 days from appointed date, claim of the assessee shall be made available to him in the month in which the GST TRANS-1 is filed thereby following the provisions of the statute in letter and spirit. Since any of these interpretations cannot be faulted on the assessees, we request you clarify the correct position of the law on ITC claim flowing from TRANS-1especially when the form is still not yet released for filing.

4.  Level playing field for the assessees is-à-vis the compliances.

The issue being faced by the assessee is that the returns cannot be revised and they are required to provide all the information in a short timeline. Also, the input matching is not available yet as the GSTR-1 &2 is not yet operational. This will have a major matching issue.Hence, a request for allowing GST-3B revision would be helpful to match the data with GSTR1 &2 and avoiding undue hassles to the assessees at large. The resolution of matters offline with State/ Central jurisdiction be notified for the teething issues, which cannot be resolved online for initial few months, this would be highly appreciated.

5.  CompositionSchemes.

Some of the composition dealers under earlier regime while migrating to GST regime got migrated under the regular scheme. Post migration, those assesses who wish to revert back to compositions here are unable to exercise this option due to the technical glitch in GSTN. In such case, a clarification is required as to the requirement of filing GSTR-3B ‘Nil’ return by them or are they required to wait till the expiration of prescribed timeline of 30th September 2017 for exercising the option.

6.  Surrender Cases.

Many assessees who are not falling within the ambit of GST due to their turnover below the threshold for registration have been migrated due to the legal mandate. In these cases, since they are not required to be under GST regime and wish to opt out, clarification on when the surrender form will be released for e-filing and clarity on whether they are required to file GST -3B ‘Nil’ Return.

7.  Amendments.

Most of the assessees who wish to effect amendments to their registration are unable to do so due to the technical glitch in GSTN. We earnestly request your good selves to set right the matter as soon as possible as small and medium assessees are dependent on consulting fraternity.

8.  Clarification through FAQs, Handbooks, and GOITwitter handle.

Most of the stakeholders are dependent on Sectoral FAQs, Handbooks and GOI Twitter for query resolution. We are amused to observe contradictory clarifications coming out GOI Twitter handle on the same issue. We request your good selves to issue a clarification on the authenticity of such contents.

9.  Payment through credit card and debit cards and without logging in/usage of OTP.

For ease of operations, we request for the payment option be enabled without OTP as many times it is being paid by the person on behalf of the entity as they may not be able to dedicate time and effort due to varieties of business reason and feasibility.

10.  URD supplies quantification while filing of monthly return

It is practically difficult and compliance feasibility and effort is highly required to practically arrive at the line item of expenditure. This makes it mandatory for monthly accounting for even the unorganized sector will be quite telling for them to operate properly under the law.

Naturally, when the turnover of the vendors is below the threshold level, it would have been ideal to have their PANquoted / address quoted instead of subjecting them for the reverse charge.The machinery provision is draconian and daunting enough for the small-scale sector and against their very subsistence especially when this community is a merit in itself as India has sustained the depression due to their self- sufficiency, this very base seeming to be hit inadvertently due to such provision.

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  • SC upholds Rajasthan HC judgment, confirms taxation of PSC pipes, jointing material specials, valves, anchor blocks supplied to State Govt. under contract for laying of pipelines for supply of water to cities and towns, as ‘sale of goods’ under Rajasthan Sales Tax Act prior to 2001;
  • Rejects assessee’s stand that composite contract for supply of goods, labour and service shall be treated as indivisible ‘works contract’ and that it was not permissible for the State to extract divisibility component therein and impose sales tax on purported sale of goods; Notes that assessee had sought sales tax exemption accorded to works contracts relating to dams and canals u/s 7AA of Rajasthan Sales Tax Act but same was rejected while treating 75% value of contract as consideration for sale of goods;
  • Distinguishing Constitution Bench’s judgment in Kone Elevator India Pvt. Ltd., SC notes that by virtue of 46th Amendment to the Constitution, a single and indivisible contract is now brought on par with contract containing two separate agreements; States, “It has also now become a settled position in law that the State Governments have power to levy sales tax on value of material in execution of the works contract” by creation of fiction whereby transfer of moveable property in works contract is deemed as sale even though it may not be well within meaning of Sale of Goods Act;
  • Refers to Larsen and Toubro Ltd. ruling which held that taxing sale of goods element in works contract is permissible even after incorporation of goods, provided tax is directed to value of goods at time of incorporation and does not purport to tax transfer of immovable property;
  • Notes that in present case, the Assessing Authority had found that agreement was clearly in 2 parts - (i) sale and supply of PSC pipes, jointing material specials, valves, anchor blocks, etc, and (ii) supply of labour and services, and same had been upheld by Appellate Authority, Single Judge Bench as well as Division Bench of HC;
  • In view thereof, dismisses appeals while concluding that “element of sale of goods shall apply to jointing material specials, valves, anchor blocks, etc.” : SC
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2017-VIL-763-CESTAT-DEL-CE

KAKATEEYA FABS (P) LTD & SIMPLEX INFRASTRUCTURES LTD Vs CCE, BHOPAL

Central Excise – work order for fabrication, erection and testing of CW liners and pipes - The main appellant fabricated pipes out of steel supplied to them by the second appellant and thereafter installed the said pipes – duty liability of the main appellant with reference to the manufacture of pipes

HELD - the main appellant have to make arrangement to receive material from the stores of second appellant or NTPC. Thereafter, they have to undertake the work as listed in the contract - the main appellant cannot be considered as a labour contractor, simply providing labourers for certain work.It is clear that they have undertaken various fabrication work in terms of work order in their own account using the material supplied by the main contractor - Payment of service tax in terms of provision of Finance Act, 1994 by itself will not absolve them from central excise duty liability for manufacture of any excisable items which might have been used in completion of the service rendered by them - duty liability of the main appellant with reference to manufacture of pipes and bends is upheld - The original authority is required to decide the case of penalty afresh – in favour of revenue

It is clear that they have undertaken various fabrication work in terms of work order in their own account using the material supplied by the main contractor - Payment of service tax in terms of provision of Finance Act, 1994 by itself will not absolve them from central excise duty liability for manufacture of any excisable items which might have been used in completion of the service rendered by them - duty liability of the main appellant with reference to manufacture of pipes and bends is upheld. The original authority is required to decide the case of penalty afresh – in favour of revenue

The original authority is required to decide the case of penalty afresh – in favour of revenue

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  • HC upholds Tribunal order which allowed tax exemption u/s 6A of CST Act on sale of milk, ghee & butter through consignment agents to Union territory, on the basis of ‘Form F’ furnished to substantiate ‘inter-State’ movement;
  • Tribunal had rejected Revenue’s stand that such sales were local transactions liable to VAT in the State of Gujarat since goods were lifted by consignment agents from dairy of assessee against remission of sales proceeds in advance; Tribunal had also refused to accept statements of transporters produced at second appellate stage, holding that Revenue could not rely on inquiries held behind the back of assessee without affording any opportunity of cross examination;
  • Tribunal had further recorded a finding that 15 years after transactions having taken place, plea of production of defective F Forms u/s 12(5) of CST Act could not be entertained; Accordingly, HC finds no fault in Tribunal’s observation that all 3 ingredients of the inter-State transaction, viz. (i) implied stipulation in the contract regarding the inter-state movement of goods, (ii) actual movement of goods from one State to another, and (iii) conclusion of sale in another State, were satisfied: Gujarat HC
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In a first of a kind judgment, Gujarat HC in the case of Advance Surfactants India Ltd. [TS-212-HC-2017(GUJ)-EXC] quashed the first proviso to Rule 3(4) of CENVAT Credit Rules, 2004 (CCR) restricting CENVAT credit utilization up to the balance available on last day of the month / quarter for purpose of discharging excise duty relating to that month / quarter, as being ultra vires the CENVAT Scheme.

Ms. Poonam Harjani (Partner, Nitya Tax Associates) and Ms. Neha Jain (Associate) analyze the possible effects of the said judgment in different scenarios. According to them, “…the rendering of the said proviso as invalid and unconstitutional to the scheme of Credit Rules would make the utilization of the Credit related to the subsequent month to the month to which duty payable was related as indefeasible.” This will allow utilization of credit available from the first day up to 5th / 6th day of the subsequent month against the tax liability of preceding month, and no interest and duty demand would get attracted upon the tax-payer. Moreover, in case of delayed payment of duty or demand pursuant to departmental proceedings, duty demand to the extent of Credit utilized post due date can be defended/adjusted on the basis of this ruling; however, same may be subject to interest liability. 

However, the authors point out that this judgment will have limited ramifications upon the past pending dispute related to credit utilization, late payments, and defaults in payment of duties. On the other hand, the recently introduced GST law remains unimpacted, which is based on the matching concept.

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