GST Book Construction

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GST and Construction Sector
(Based on Model GST Law released in June, 2016)
CA Sandesh Mundra
Published by :
SANDESH MUNDRA, FCA, DISA
Edition : September, 2016.
Knowledge
Not for Sale Partner
Author
Disclaimer
This document is for general guidance and informational purposes only, and does not
constitute professional advice. You should not act upon the information contained
in this communication without obtaining specific professional advice. No
representation or warranty (express or implied) is given as to the accuracy or
completeness of the information contained in this communication, and, to the extent
permitted by law, author accept no liability, and disclaim all responsibility, for the
consequences of you or anyone else acting, or refraining to act, in reliance on the
information contained in this document, or for any decision based on it. Without prior
permission of author this communication may not be quoted in whole or in part or
otherwise referred to in any document.
This Book is dedicated
To
Lord Shiva
Who has been a constant source of positive energy

which is required to for all such intellectual
endeavours
This is our third book after

Business Controls, Monitoring and Internal Audit of
construction sector which was published by The
Institute of Chartered Accountants of India in 2013
and
Simplifying Multi State VAT on Works Contract

published by Young Global Publications in 2015
(Second edition published in Sept

2016)
PREFACE
The word GST springs in a sense of positive energy every time I hear it. Goods and Service
Tax has been a marathon project of various governments, finally seeing the light after
so many years of hard work amidst all the political battles going on in the background.
As a professional, our office has been keenly following all the developments related to
GST and has been keenly awaiting the final roll out and implementation of this mega tax
reform.
A common man may carry a very different perception of what GST is all about as compared
to the professionals involved in understanding the intricacies of this new law. Although
the final law has so far not come out in the public domain, but it is the sheer excitement
on one end (where the government and the professionals stand) and probably worry
and concern on the other hand (where you find the industry stakeholders stand) which
has made us pen down this book.
Construction, Real Estate and Infrastructure related issues have been a passion right from
the start of professional carrier and they continue to do so and hence we could not stop
ourselves from doing an impact analysis of this sector as far as GST is concerned. As I
write this preface, I know the government offices are working day and night in order to
work towards the formation of the GST council and laying down the agenda for the first
meeting of the council with a view to clear the major issues like rate, exemptions, final
law and rules etc.
I must at this stage acknowledge the efforts of my Subordinate Naimish, who has been
after this book as if there is no tomorrow. He has played an immensely critical role in the
completion of this book. I am sure this would help him emerge as a more matured
professional all geared up to take up the GST implementation challenges.
I must also thank all my coauthors who could take the pain of writing the chapters allotted
to them and respond to us in a very short span of time. The deliberation and brain
storming that is done by involving multiple professionals is something that makes the
study very interesting. And the fact that we discover a better way to interpret a provision
when we discuss with each other keeps us grounded and makes us realise that at the end
of the day we all are nothing but students trying to unlearn the old and learn the new.
I also acknowledge the role played by my parents in guiding me and they have been the
strongest force of motivation in all such efforts. Writing this book has been little painful
as it has kept me away from my family including my wife CA Suman and kids Aarna and
Aahan who have been kind enough to ignore this unwanted change.
I await the comments of our readers who get a copy of this book in their hands by writing
to us on sandesh.mundra@smaca.in
CA Sandesh Mundra
304, Super Plaza, Sandesh Press Road, Vastrapur,
Ahmedabad, Gujarat 380 054
Phone: 07940032950
Mobile: 9426024975
Email: sandesh.mundra@smaca.in Knowledge Partner
ABOUT THE AUTHOR
Qualified as Chartered Accountant in 2004. Has been in

professional practice since then. Authored the technical
Guide on Business Controls, Monitoring and Internal Audit
of Construction Sector issued by The Institute of Chartered
Accountants of India (ICAI) in 2013 and Simplifying Multi
State VAT on works Contracts issued by Young Global
Publishers in 2015. Has been appointed to the three member
National level Direct and Indirect Committee of Builders
Association of India (BAI) for year 20142016. Successful CA Sandesh Mundra
representation to the Ministry of Finance on service tax
related issues on behalf of BAI.
Has handled several professional assignments related to Construction, Real

Estate and Infrastructure sector. Most of the assignments relate to tax
structuring, drafting legal documents, giving opinions, handling litigations and
corporate training on several areas related to the construction sector.
Has acted as a speaker on various topics in seminars and study circle meets
organized at Mumbai, Ahmedabad, Gandhinagar, Navsari, Jamnagar, Rajkot
and Nadiad Branches and study circles of various professional bodies. Regular
column writers for Indian Construction (Journal of Builders Association of
India) & web portals like Consult Construction.com & Consolidation of
accounts.com. Some of his articles have also been published in the National
Journal of the Institute of Chartered Accountants of India.
CO-AUTHOR
Graduate in Commerce having core competencies in the

area of indirect taxation of construction and real estate
sector. Active in giving opinion on taxability on wide
range of issues in indirect taxes. Handles the multi state
VAT structuring for some of the corporates along with
several ground level compliances in a very organized
manner. Has also keen interest in handling litigations
in the field of indirect taxes. He can be reached at
naimish.padhiar@smaca.in.
Mr. Naimish Padhiar
Other Co-Authors
(For detailed profile, please refer at the end of the book)
Name Place Mobile EMail

Adv. Samir Ahmedabad 9898057711 samir@samirsiddhapur
Siddhapuria ia.com
CA Dayananda K Karnataka 9845025682 daya@vishnudaya.com
CA Harshit Shah Maharashtra 9769156261 harshit@consultingedg

& CA. Keval Shah e.in
CA Hanish S Karnataka 9916836166 hanish.s@hsadvisors.in
CA Deepak Gulati New Delhi 9810006345 dga@dga.in

About Consult Construction (Knowledge Partner)
Consult Construction can help your business in many ways. Visit our
portal www.consultconstruction.com to know more
As far as GST is concerned we can help you in :-
Feasibility studies
Analyse the impact of GST Law on business activities and identify any changes that may need to be
implemented to comply with the new rules.
Provide advice on any additional guidance issued by either the Centre or State in the buildup to the
change date and highlight any impact this may have on businesses preparation for the new rules.
IT and systems
Assist with identifying necessary changes to accounting, billing and invoicing systems.
Advise on the types of information and systems that may need to be implemented to correctly
capture the place of supply.
Review and identify any gaps in current systems, which may be unable to deal with the
changes to the rules and consider manual workaround solutions or additional bolt on
software where required.
Testing of systems to ensure that they are compliant with new rules prior to going live.
Compliance
Identify additional compliance responsibilities that will be created as a result of the new
rules.
Assist with registration at Centre and State level.
Compliance outsourcing.
Advisory
Help identify instances where the changes to the rules could potentially create complex
issues for businesses in specific sectors.
Assist clients in assessing the potential impacts of these changes on profit margins, pricing
structures for such supplies and any impact on customer behaviour.
Provide guidance on GST implications on current and future contracts.
Advise businesses on the advantages or disadvantages of the State level registrations and
determine whether this would outweigh any benefits of not obtaining separate State wise
registrations.
Advise on practices for determining whether customers are likely to be nontaxable persons
and how best to establish and capture where they are located for the purposes of the
new rules.
Advise on approaches to valuing bundles of products consisting of both services and goods.
Assist businesses to understand and meet the invoicing requirements that may be required
across the different Member States.
Quick Connect - GST and Construction Sector by CA Sandesh Mundra
Reach us at sandesh.mundra@smaca.in - +91 94260 24975
CONTENTS
i. Preface .............................................................................................................
ii. About Authors ..................................................................................................
1. Existing Controversies ..................................................................................................... 1
2. Introduction & Overview of GST ..................................................................................... 8
3. Registration under GST .................................................................................................. 14
4. Taxable Supply of Goods & Services.............................................................................. 22
5. Exemption & Negative List (Including Supplies to SEZ) ................................................. 32
6. Time of Supply ............................................................................................................... 38
7. Place of Supply & Future of Old Plannings in CST ......................................................... 46
8. Valuation of goods & services ....................................................................................... 55
9. Input Tax Credit under GST............................................................................................ 65
10. Invoicing, Payments & Debit Notes ............................................................................... 77
11. Returns & Penalties. ...................................................................................................... 83
12. Ongoing Contracts & other Transitional Provisions ...................................................... 89
13. Taxability of Sub-Contractors ........................................................................................ 95
14. Retention & Withhold Amount ..................................................................................... 97
15. Free of Cost Supplies & Site Transfers......................................................................... 100
16. Liquidated Damages & Settlements ............................................................................ 103
17. Joint Ventures (Joint Development / Consortium) ..................................................... 105
18. Job work & Onsite Manufacturing............................................................................... 108
19. Reverse Charge Mechanism ........................................................................................ 110
iii. Brief Profile of Other Co-Authors ......................................................................... 112

Chapter :- 1 - Existing Controversies
Conversation between a Contractor / a Real Estate Developer / an

Infrastructure Player on one side and god on the other side
Hi,
I am the person who is responsible in building this country from scratch. Whether its
building a road, a bridge, an airport terminal, a factory or even a house, its me who has
taken a lot of pain and burnt that midnight oil to deliver that perfect structure. And I
know that theres a long way to go and the coming times are even more challenging
looking to the increasing demand and aspirations of the citizens of this country. I am
confident of meeting all these aspirations provided, I will get a stable taxation structure.
My interest is not to pay lesser taxes but to pay all the taxes in an environment full of
certainty.
I heard about GST and this has increased my hopes of getting an easy system going by
what the government is claiming. However, I have my own doubts on this system and
want someone to address all my concerns right at this moment.
Is there anyone who can do that ?
Reply from the God :

Dont worry child, heres a book which will answer all that you can imagine. Just take a
sip and enjoy this knowledge dip. And continue to work hard with all your energies to
steer this country amongst the topmost nations of this world. Ask as much as you
can
Response from the author :

As is the order of the almighty, we have strived to answer all the questions of our friend
and if there is anything still left out, please let us know so that it can be addressed in the
upcoming editions.
1
Current Complications in the Construction Sector

Before we go to address the questions raised by our friend, let us just do a small round of
flashback and see the current pain points in the existing system and the expectations from the
new GST system :
Negative List / Exemptions Under the current regime, the negative list / exemptions of
goods and services have been separately defined for Excise, Service Tax and VAT. So for
example, if public road construction is exempt from service tax, it is taxable under VAT.
Manufacturing of Ready Mix concrete is exempt from Excise, however its taxable under
VAT. Construction of a real estate structure prior to entering into an agreement with a
prospective customer is not taxed under VAT, however is taxed under service tax if some
amount is received prior to completion and so on. Ideally for the ease of business, there
should be a single and comprehensive negative/exemption list for all forms of GST i.e. CGST,
SGST and IGST. It can be very well seen that the government has over a period of last 34
years, constantly made a serious effort to tone down the exemptions. The intention is to
continue the exemptions only for the activities involving immense public interest. Hence
the governments are expected to work together and identify projects critical to country's
development where the development is taking place solely on the basis of public interest.
Central Government may very well be able to control the CGST and the IGST Law, but to
what extent they would be able to control the deviations in the respective SGST Laws
through GST council is something which only time will tell.
Negative List for Input Credit A problem which the construction sector faced in the current
scenario is that it has found itself in the exclusions list for the purpose of availment of Input
Credit by the recipient of the construction services both under VAT and Service Tax. It is
seen in the model draft law that this provision is continued. This definitely goes against the
basic theme behind GST i.e. removal of cascading impact of taxes. Besides, can any
manufacturer or service provider work without a building, which is in fact the first
requirement in order to develop the ability to do any economic activity.
Treatment of works contracts Firstly identifying whether a contract is a pure sale or a

service or a mix in the form of works contract has always been a matter of dispute. We are
still grappling with such questions from the authorities who continue to look at a contract
from a very biased angle. Globally the trend seems to be to treat the construction activity
as a service irrespective of the element of material which gets incorporated in works
contract. Its heartening to note that construction is deemed to be a service under the
model GST Law. However looking to the constitutional amendment bill, we are surprised
to see why Article 366(29A) (article which permitted states to levy sales tax on works
contract on deeming basis) has been retained, when it should have either been removed
or amended with a clear sunset clause. The retention of this article has added to the
growing confusion about the taxability of works Contracts under the proposed GST regime
2
which promises to treat both goods and services at par. The moot question now is whether
the construction activity shall be treated as goods or services or any separate criteria shall
be set for composite contracts to levy GST on them. We hope the government comes out
and addresses this specific concern to avoid any misuse of the article either by the
authorities or the taxable person.
iii. Origin vs Destination The current system of taxation under sales tax requires the dealer
to identify the place from where the goods are moving i.e. the place of origin. It is the state
from where the movement of goods originate has the right to collect tax over the goods
whether its a sale simplicitor or a works contract. If we go back and check the judicial
history we find that this has led to several disputes in the past. As far as GST is concerned
on the international lines, the government wishes to bring in a destination based taxation
exactly opposite to what is prevalent today and ironically partially trying to replicate a
system which existed in our country in mid50s. However this time it will be done with the
help of one of the most interesting and complex rules which will be introduced under GST
as place of supply rules. These rules determine the place of consumption of goods and
services which will determine the jurisdiction having the sovereign right to collect the
revenue. Thus there is every possibility that two jurisdictions claim their area to be the
place of consumption in order to maximize their revenues. The construction sector thus
needs to identify all such areas where the possibility of disputes could be high and
accordingly propose proper solution to the government well in advance.
For e.g. If the services of an architect are consumed by the Head office in Maharashtra for a
project being executed in Karnataka, now in which jurisdiction will the architect be legally
required to discharge his tax liability under GST ? Whether in Maharashtra where he raises
the invoice or Karnataka, where the services are ultimately consumed. Further what if some
of such services are covered under the reverse charge and the service recipient decides to
allocate the service over different projects running in different states based on the
proportionate use. All such issues need to be resolved properly making the law more
administratively convenient rather that theoretically satisfying to the government.
Impact of the Landmark judgements of the Apex Court Works contract is one area, where
the taxability and valuation till date have been governed more by the court judgements
rather than the prescription of act and rules. Some of the judgements relate to identifying
whether a particular contract is a works contract or not, some determine the value of goods
involved in a contract, some on taxability of inter state works contract etc. Now, these
judgements may remain relevant even under GST. The government may also be requested
to cover such issues within the proposed education guide that they may be planning to
release after introducing the GST law to facilitate its implementation.
iv. Contractor Subcontractor relationship When we look at the different state VAT laws,
we would see a common pattern while defining the taxability of transactions between
contractor and subcontractor. This is so due to the landmark judgement of Supreme Court
3
in the case of State of AP vs. L&T (2008TIOL158SCVAT). As a result the state laws have
been drafted in a way to tax either the contractor or the subcontractor. One needs to
assess the relevance of this critical judgment to determine the position that is to be taken
once GST is implemented. Although the government may claim that when complete Input
credit is available to everyone in the chain, no resort should be had to this past practise.
However, practically if one party pays and the other party can avoid paying, then it can
result in reduction in efforts towards compliances. Further this shall also lead to ease of
business more particularly when the contractor undertakes exempted project. Whether it
would be possible to claim similar exemption under GST on account of multiple supplies
being taxed is to be seen.
v. Transitional provisions :
(a) The outstanding Input credit under either VAT / Service Tax / Excise may be deemed to
be the opening credit under GST instead of setting up a refund mechanism for the same.
Suitable procedures need to be laid down for set off of taxes lying under the Closing
Stock / Closing Work in progress if the service provider may have opted for composition
schemes and may not be filing the return with details of tax credit.
ii. Interest and Penalties Taking a lenient view, the provisions of interest and penalty in the
first two years should be kept very moderate. The expected rate under GST could be as high
as 27% which may lead to increase in working capital requirements as the point of taxation
is most likely to be on accrual basis.
iii. Ongoing Contracts All the ongoing projects may have certain existing taxability pattern:
(a) Exempt under VAT and Service Tax
(b) Taxable under VAT but exempt under Service Tax
(c) Taxable under Service Tax but exempt under VAT
(d) Taxable under both VAT and Service Tax
The exemptions as above may either be general in nature available to all or may only be
available for projects in a particular geography or to a particular industry or may be time
specific available for projects initiated in a particular duration.
Now the biggest challenge would be to manage the balance portion of these ongoing
projects taking care of the new tax regime under GST.
The transitional provisions should be drafted in such a way that they do not negatively impact
either the client (where the tax clause is in favour of the contractor) or the contractor (where
the tax clause is all inclusive and even the future variations are in the scope of the
contractor).
4
vi. Composition Scheme Under GST Construction sector over the years has got used to
payment of taxes under simplified composition schemes on the total project value without
any Input Tax Credit. Due to unorganized nature of this sector, there shall always be a class
of contractors who may not be able to maintain records as per the prescribed norms.
However the current model law does not suggest any such scheme of taxation. Hence the
government should come out with a simplified composition scheme which requires them
just to maintain their turnover records and pay taxes at a comparatively lower rate without
availing any Input Tax Credit.
vii.Real Estate Transactions Real Estate sector has been marred with a lot of controversies in
last few years both under VAT and Service Tax. Some of the issues which need to be
addressed are:
(a) Valuation of Land There should be a clear mechanism to arrive at a market value of
land in case of composite contracts and where the value has been mentioned in the
agreement, the same should be readily accepted.
ii. Relevance of Building Completion certificate The principles as existing in the current law
should be continued even under GST keeping both CGST and SGST at par.
iii. Barter Transactions Proper valuation mechanism should be drafted to take care of barter
transactions. For e.g. when the land is exchanged for the constructed property.
viii. GSTN The information technology network has been much talked about under GST. It is
also found in some of the discussion papers released by the government that there would
be an online return filing platform where everyone will report their transactions. That is
both the buyer and the seller will report transactions
with each other. Now the tax credit lying in the purchases made by the buyer shall only be
available for availment, provided the purchases reported by him are cross confirmed by the
sale transactions reported by the seller. The credit would be available only if there is exact
match of the value reported by both the buyer and the seller. Now it is often seen in the
construction sector that on several occasions there would be a difference between the
value as reported by the contractor which may be the bill put up by him and the value as
certified and reported by the client i.e. the buyer of construction services. If all such
transactions are rejected by the GSTN network for availment of tax credit, it would
unnecessarily have a negative impact on the overall fund flow. Hence proper exceptions
need to be drafted in the provisions of tax credit under GST for such cases.
ix. Supply other than for a consideration This is a regular feature in the construction sector.
Some such transactions are as below :
(a) Supply of Free Issue Material by the client to the contractor Presently such transactions
are nonvaluated transactions and no invoice or tax is required to be paid by the client
either under VAT or service tax when such materials are issued to the contractor as there
is no sale. Now with GST targeting supply, all such transactions may be covered within
5
the tax net and may create a lot of administrative hassles as there could be multiple such
transactions in the stock register at a particular site. If invoices have to be raised for all
such transactions only to pass on the tax effect, the same may lead to a lot of
administrative inconvenience and impracticality and ultimately non compliances.
ii. Transfer of Capital Goods / Consumables from one site to another These transactions from
one construction site to another may again come within the purview of GST in its current
form targeting all supplies. Hence the industry would need some reprieve to avoid paying
GST on such transactions especially if it is discovered during GST Audits and Assessments.
x. Current Exemptions as available under CST Sale in the course of Import, High Seas Sales,
Supply in transit have been a tool of lot of tax planning under works contract. Although of
late each of these sales has had their share of litigations, but they continue to be employed
by the contractors for the projects across the country, enjoyed exemption in the course of
Interstate movement and supply in the course of Import should continue to be exempt as
per the current practice specially in view of continuation of the 1% additional tax to be paid
in the state of origin. The proposed amendment of Article 286 of the constitution seems to
be step in the right direction.
xi. Point of Taxation Construction sector deals with some typical issues like typical Bill
Certification process, mobilization advances for the projects, system of security deposits,
retention money, bad debts and levy of liquidated damages. All such transactions need to
be specially dealt with a view to avoid excess discharge of GST directly or indirectly.
xii. Partial Reverse Charge It is practically experienced that a provision like partial reverse
charge mechanism goes against the principles of ease of doing business and hence needs
to be avoided. The partial reverse charge for manpower supply (till 142015) and for works
contract services has badly affected the construction sector. This mechanism in certain
typical structures has also led to blockage of the Working Capital. Say three parties are
involved, A Pvt Ltd company which is a client which appoints a contractor which is a
partnership firm and which further sublets the work to a subcontractor which is also a
partnership firm. Now when the sub contractor bills to the contractor, he would charge
service tax applicable rate as there is no reverse charge applicable here. But when the
contractor raises the bill on the client, he would only be able to charge service tax on a
partial basis (50%) due to applicable provisions. This results in a situation where the
contractor now has excess input tax credit lying with him. Although there is a mechanism
to apply for refund of such excess input credit, however looking to the time frame in which
such refunds are released by the department, it results in working capital bottleneck to the
extent of value of tax involved in the transaction.
xiii. Tax Deduction at Source Construction Sector is probably the only sector which is subjected
to TDS under the Indirect Taxes like VAT. Although the idea behind the move is to ensure
6
timely collection of taxes from the construction sector, but on several occasions it leads to
excess collection of tax due to various valuation benefits available to works contract. The
current pain points in this regard are:
A. Deduction of TDS on mobilization advances
B. Deduction of TDS in one accounting year and execution of work in another accounting
year
C. Deduction of TDS on a value not at all taxable
D. Deduction of TDS more than the actual liability leading to a situation of refund
E. Deduction of TDS on full invoice without considering the impact of future credit notes
If under GST again the sector is subjected to TDS, then suitable mechanism needs to be
ensured that which is since under GST, all the supplies whether towards goods or services is
supposed to be treated similarly, hence the provisions of TDS discriminatory to the
construction sector should be discontinued.
7
Chapter :- 2 - Introduction & Overview of GST
Q1: I have heard so much about this new taxation. Can you explain me what is GST from my
perspective as a contractor and a developer?
GST is one indirect tax for the whole nation, which is meant to be a unified indirect tax across
the country on construction services and will make India one unified common market. The
present structure of Indirect Taxes is very complex in India. There are so many types of taxes
that are levied by the Central and State Governments on Goods & Services. It has been long
pending issue to streamline and subsume all the different types of indirect taxes and implement
a single taxation system called GST.
Note:
Alcoholic beverages for human consumption are proposed to be kept out of the purview of GST
and hence will be taxed as per current tax structure.
GST on petroleum products would be levied from a notified date recommended by the GST
Council
Includes Excise duty levied under Medicinal & Toilet Preparations (Excise Duties) Act, 1955
8
Implementing the GST will ease the compliances, uniform the tax rates and structures, remove
the cascading effect of taxes levied by States & Centre, will improve the business
competitiveness and will benefit everyone doing trade in some or the other form whether as a
contractor or as a developer.
In the current system in India, tax is levied at each stage separately, by the Centre and the State,
at varying rates i.e. 10.5% / 6% / 4.5% for service tax and different rates by different States, on
the value of construction services. But under the GST system that is set to be introduced, tax
will be levied only on the value added at each stage by the subcontractors, main contractors
and developers or builders. It is a single tax collected at multiple value additions with a full set
off for taxes paid earlier in the value chain by subcontractors and main contractors. It is
pertinent to note that the inter credit of different taxes paid in the current regime be a service
tax, VAT, CST, etc. to Centre or States are not allowed and thus becomes a part of the cost on
the suppliers. Thus, under GST the final buyer / client will bear only the GST charged by the last
person i.e. developer or builder or the contractor.
Sub-contractor will claim back Client / End Buyer will pay GST
the input on materials and to the builder and would exactly
services and charge GST on know the total indirect tax
main contractor component involved in the
Main Contractor will claim Builder / Developer will
transaction
back the input of sub- claim back the input of
contractor along with credit Main Contractor and
on materials and other charge GST on Client /
services directly procured End Buyer.
by him and charge GST on
Builder / Developer / Client.
9
Q2: I have heard that we shall have One country, one tax when GST is implemented. What
would be the exact structure of GST in India?
Many countries in the world have a single unified GST system i.e. a single tax applicable
throughout the country. However, in federal countries like Brazil and Canada, a dual GST system
is prevalent whereby GST is levied by both the federal and state or provincial governments. In
India, a dual GST is proposed whereby a Central Goods and Services Tax (CGST) and a State
Goods and Services Tax (SGST) will be levied on the taxable value of every transaction of supply
of goods and services.
The Dual GST is expected to be a simple and transparent tax with one or two CGST and SGST
rates. The structure of the model law issued in Jun16 comprises of CGST Act, SGST Act and IGST
Act. The dual GST model would give adequate f.lexibility to the States to levy taxes on a
comprehensive base of goods and services at all points in the supply chain. Thus, financial
liberty of the States would be maintained. GST is a consumption based tax. It is based on the
Destination principle. GST is applied on goods and services at the place where actual
consumption materializes.
Goods & Service Tax
Central Goods & Service Integrated Goods &

State Goods & Service Tax
Tax Service Tax
(SGST)
(CGST) (IGST)
The Centre and the States would have parallel jurisdiction for the entire value chain and for all
taxpayers. The administration of GST under the three components will be as under:
Central GST (CGST) to be levied on intra state trade and administered by the Centre
State GST (SGST) to be levied on intra state trade and administered by the State
Governments
InterState GST (IGST) to be levied on interState trade and administered and collected by
the Centre. The proceeds would be shared as per predecided proportion.
To the extent feasible, uniform procedure for collection of both Central GST and State GST is
prescribed in the respective legislation for Central GST and State GST.
The IGST model seeks to address Business to Business (B2B) and Business to Consumer (B2C)
transactions; transaction in services; and interState transactions. It can also be noted that IGST
10
will not be a Tax in addition to the SGST and CGST so one should not presume that IGST is a
third tax but it is only a mechanism to monitor the interstate trade of Goods and services and
further to ensure that the ultimate SGST is gone to the consumer state since the GST is a
destination based tax.
Q3: What will be the impact of GST on Construction & Real Estate Sector?
Implementation of the GST law will have a positive impact on the real estate sector with
expected reduction in its tax burden. The law will singlehandedly solve many of the challenges
faced by the real estate sector and help in pulling up the unorganized sector along with the Real
Estate Regulation Act, 2016. Heavy taxes that are being borne in a nontransparent manner are
expected to be very transparent in GST. It is unclear what would be the rate of GST applicable
on construction services, hence it would be difficult to confirm the exact impact on GST on the
construction sector. However going by the informal discussion, it is learnt that the rate is
expected to be something between 1820%, which is what the current rate directly and
indirectly being borne by the construction sector. Besides the simplicity in taxation, GST would
bring in other advantages like transparency, seamless credits, ease of business by lack of border
controls, promoting economic efficiency through a destination based taxation system. Overall
Construction costs would be reduced to some extent which would benefit the end consumer.
Apart from the advantages, the complexities in the compliances and assessments shall also be
greatly reduced as the tax laws would also be unified.
There would be lesser burden of tax on purchases of major inputs like cement and steel, as tax
credits would be available for set off at various stages which are currently restricted. Since GST
may be levied on a single value, the current issue of levying tax on tax (VAT on central excise
duty) is likely to be removed. Hence the cascading effect of taxes shall be removed with the
resulting transparency which will significantly reduce tax evasion through more efficient
transactiontracking methods, and improved enforcement and compliance. Hence the
implementation of GST will enhance the investment in real estate & infrastructure sectors.
Q4: What are the expected tax rates under GST for all services under the domain of
construction?
Under the present Model GST Law, 2016, the structure of rates is not prescribed, but it is
expected that there will be a cap of 18% on the total rates. It is expected that the GST rates will
be prescribed in schedules as identical under Central Excise Laws. CGST and IGST rates will be
common for all the States while it is expected that the SGST rates will be different and may vary
from States to States within the float permitted by the GST council.
11
It is expected the following rates may be prescribed under GST,
SGST + CGST % Supply of Goods & Services

0% Natural & unprocessed produces in unorganized sector,
goods having social implications
Basic Educational, Medical, Statutory activities of Govt.,
0% Services in present negative list
0% Export of Goods & Services, Services to SEZ
2% Gold & Silver ornaments, precious & semiprecious
stones
Goods of basic necessities, all industrial & agricultural
Around 10% inputs & passenger transport services
Normal Rate on all goods & services other than
Around 18% mentioned else where
Goods & services without
restriction on rate Cigarettes, other tobacco products, lottery tickets, luxury
services, entertainment, betting & gambling
Will be brought in GST at a
Aviation turbine fuel & Petroleum products
later stage
Out of GST Alcoholic Liquor
The present rate in Singapore is 7%, in Japan is 5% and in New Zealand its 15%.
Q5: Will there be any additional 1% tax on construction services as per earlier suggestions?
As per Clause 18 of the Constitution (122 Amendment) Bill, 2014 (Constitutional

Amendment Bill) as passed by the Lok Sabha in May 2015 and referred to the Select Committee
by the Rajya Sabha, an additional tax on supply of goods, not exceeding 1% in the course of
inter State trade or commerce shall be levied and collected by the Government of India for a
period of two years or such other period as the Goods and Services Tax Council may
recommend, and such tax shall be assigned to the States from where the supply originates.
The purpose of 1% Additional Tax was to compensate the manufacturing States for loss of
revenue in case of inter State trade while moving towards GST. The Manufacturing States like
Gujarat, Maharashtra, Tamil Nadu, etc. have raised a concern over loss and have recommended
to incorporate an additional tax 1% for minimizing such loss on movement of inter State trade.
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However, with the increase in the tax burden to the end consumers with increase in rate, the
opposition in the Rajya Sabha has stuck the bill and the same was not cleared in the session
with a reason to remove the additional 1%.
With a view to move forward, the cabinet has dropped the additional 1% tax and has assured
the manufacturing States to be compensated for the loss. The Constitutional Amendment Bill,
2016 was then passed in the Rajya Sabha on 3rd August, 2016 and hence the additional tax of 1%
was dropped. Thus the additional 1% tax shall not be levied on construction services as per
earlier suggestions.
Q6: Will the construction services be taxed at same rate across the country under GST?
As per the present structure of indirect taxes, where the service tax is levied between 4.5%
to 15% and the average maximum rate of VAT across the States is effective at around 15%,
subsuming the rates for a typical building construction project, the indirect tax rate is worked
out at 1821% across the construction & real estate sector. It is expected that the CGST and IGST
rate being charged by the Centre will have single and uniform rate across all the States,
however, SGST rates shall be defined by the States and may vary from State to State.
Under the construction services, a single rate will be levied on the total services supplied. Hence
a total rate summing the SGST rate and CGST rate shall apply to all the construction, real estate
and infrastructure services subject to the place of supplies in the different States.
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Chapter :- 3 - Registration Under GST
Q7: Who is liable to be registered?
All contractors, subcontractors, developers and land owner (in case of units allotted to land
owner in form of consideration against land and land owner has sold the units further before
issue of completion certificate), whether they are companies, partnerships or selfemployed
individuals are liable to be registered if their annual turnover involving taxable supplies exceed
Rs. 9 lakhs (Rs. 4 lakhs in case of NorthEast States including Sikkim) GST threshold in any
financial year within a period of 30 days. This limit has presently been described under the Draft
GST Law and may change based on final rounds of negotiations between States and Centre.
Example: Mr. A (in Gujarat) supplied the following services in previous financial year.
Turnover for
Supplies Turnover
Threshold Limit
Taxable
4,00,000
(including Inter-State)
Case - I :
Exempt 15,00,000 Rs. 10,00,000/-
Contractor
Supplies to SEZ* 1,00,000
Export* 5,00,000
Sale of units before
Completion 10,00,000
Certificate
Case - II : Sale of units after
Rs. 18,00,000/-
Developer Completion 6,00,000
Certificate
Other Taxable
2,00,000
Incomes
Sale of units before
Completion 4,00,000
Certificate
Case - II :
Sale of units after
Land Rs. 12,50,000/-
Completion 8,00,000
Owner
Certificate
Other Taxable
50,000
Incomes
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*Supplies to SEZ & Export Supplies will be included as taxable turnover with the zero rated
supplies.
Q8: Whether registration would be necessary in case a person is registered under earlier law?
Every person who, on the day immediately preceding the appointed day, is registered or
holds a license under an earlier law, shall be liable to be registered under GST Law as per the
clause 2 of Schedule III. Hence if a contractor, subcontractor, developer and land owner is
registered under service tax, VAT, Excise, CST or any other earlier laws, prior to GST, they would
be liable to be registered under GST Law. However it may be noted that government plans to
issue new numbers against all the existing registration numbers without there being need for
separate application in that regard.
Example : M/s ABC is a contractor who is currently having several registrations under the
Indirect Tax laws. For his current registration numbers he shall be required to take action as
below:
Current Number Jurisdiction Government response Further action required from
under GST contractor
Service Tax India Issuance of New CGST Continue with New number
(Centralized Registration number
Registration)
Excise Bhopal Factory Issuance of New CGST Has an option to surrender if not
Registration number required separately for the factory. If
required then it has to be proved as a
separate business vertical as per laid
down guidelines of Accounting
Standards.
VAT Madhya Pradesh Issuance of New Madhya Continue with New number
Pradesh SGST
Registration number
CST Madhya Pradesh Issuance of New IGST Continue with New Number
Registration number
VAT Gujarat Issuance of New Gujarat Continue with New number
SGST Registration
number
CST Gujarat Issuance of New IGST Continue with the new number
Registration number
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Q9: A. Whether there is any compulsion to get registered if the threshold turnover is not
reached?
As per clause 5 of the Schedule III, under following transactions and events, contractors,
subcontractors, developers and land owner shall be liable to be registered even if the threshold
limit of the turnover is not exceeded:
making any interState taxable supply say transfer of a crane from one state to another pursuant to
a project in another state
casual taxable persons say going to a state for a small repair job and coming back
who are required to pay tax under reverse charge say availing the services covered under reverse
charge
nonresident taxable persons
persons who are required to deduct tax
persons who supply goods and/or services on behalf of other registered taxable persons whether
as an agent or otherwise
input service distributor
persons who supply goods and/or services, other than branded services, through electronic
commerce operator
every electronic commerce operator
an aggregator who supplies services under his brand name or his trade name
as may be notified by the Central Government or a State Government
B. Is it true that the person making IGST supply is required to obtain compulsory registration
under section 19(1) of the Model GST Law irrespective of threshold limit?
Registration no is required to be obtained compulsorily by the person if the person is covered

by section 19(1). Schedule III is prescribed u/s. 19(1) which provides that the person effecting
IGST transaction irrespective of threshold limit given in clause 1 of schedule III (i.e. aggregate
turnover of Rs:9 lakhs other than north eastern states and Rs:4 lakhs in case of north eastern
states) is required to obtain registration no.
Q10: What if I start a new construction site in a New State? In that case when do I need to
register myself? Do I need to again take all the three numbers i.e. CGST, SGST and IGST?
The new business is liable to be registered upon crossing the threshold turnover in every
such State within thirty days from the date on which it becomes liable to registration.
A person, though not liable to be registered may get himself registered voluntarily, and all
provisions of this Act, as are applicable to a registered taxable person, shall apply to such
person. Hence one may choose to register from the day one itself if it is expected to cross the
threshold in short time.
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If the said construction site is treated as a separate business vertical and if you desire to have
separate CGST, SGST and IGST numbers for the same, you may apply accordingly. In any case
since its a new state, you will be compulsorily required to obtain a SGST number.
Q11: What is the procedure to get registered?
As far as the current model law is concerned, the relevant rules for the registration under
GST have so far not come out in the public domain. It is expected that the GST rules may be
issued for incorporating the procedures of registration under GST. The discussions hereunder
are based on the Report of the Joint Committee on Business Processes for GST on Registration
Process which was finalized on 22nd and 23rd July 2015. For obtaining registration, all the
taxable persons shall interact with tax authorities through a common portal called GST
Common Portal that would be set up by Goods and / or services Tax Network (GSTN). The
portal will have backend integration with the respective IT systems of the Centre and States. A
new applicant would be allowed to apply for registration without prior enrolment. A Facilitation
Centre (FC) has also been perceived where FC shall be responsible for the digitization and / or
uploading of the forms and documents including summary sheet duly signed by the Authorized
Signatory and given to it by the taxable person. After uploading the data on common portal
using the ID and Password of FC, a printout of acknowledgement will be taken and signed by
the FC and handed over to the taxable person for his records. The FC will scan and upload the
summary sheet duly signed by the Authorized Signatory. This system is in line with the practice
that is in vogue for submitting TDS returns by more than 2 million tax deductors to the Income
Tax Department.
Q12: Whether any temporary registration is available for small projects being undertaken in
any new state which may automatically get cancelled in some time? What will be the validity
of such registration?
As per the Model GST Law, casual taxable persons and nonresidents shall be allowed to
take a casual registration as per the special provisions relating to casual taxable person and non
resident taxable person under clause 19A.
A supplier who is not registered on regular basis, whether on mandatory or voluntary basis, in
other
State (s) and desires to conduct business in a particular State for a limited period, will have to
obtain registration in that State for that limited period. Such suppliers are known as casual
dealers and shall not be allowed to opt for composition scheme. However, the supplier would
be eligible to claim ITC on purchases / inward supplies. The period of registration would be
mentioned in the registration certificate also. The format of Registration Certificate for such
taxpayers is different from the regular taxpayers. Even the application form for registration will
have field for ascertaining estimated supplies. Return for such taxpayers would also be
different. Such taxpayers would be required to selfassess their likely liability and deposit the
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same as an Advance Tax. Such amount would be deposited by way of two Demand Drafts (one
for Centre and other for State) which would be returned to the taxpayer after he has discharged
his final liability. The GST Law Drafting Committee may provide for conditions for registration
and tax payment.
A Nonresident Supplier is a person who, in the course of business, makes an intrastate supply
of goods or services or both, but is not a resident in the state in which he has applied for
registration, but is already registered in any other state. Since the NonResident Supplier is
already registered in another State, there would be an easy way of registering such entities in
the State in which registration is applied as NonResident Supplier.
It is relevant to note the definition of nonresident taxable as per clause 2 as under,
(21) nonresident taxable means a person who occasionally undertakes transactions involving
supply of goods and/or services in the course or furtherance of business whether as principal,
agent or in any other capacity, in a taxable territory where he has no fixed place of business;
The certificate of registration in such cases shall be valid for a period of ninety days from the
effective date of registration. The proper officer may, at the request, extend the aforesaid
period of ninety days by a further period not exceeding further ninety days.
However, such a casual taxable person / a nonresident shall be liable to make an advance
deposit of taxes of an amount equivalent to the estimated liability for the period of which the
registration is sought. Further if the extension time is sought maximum up to an additional 90
Days, an additional amount of tax equivalent to the estimated liability for the period for which
extension is sought. Such amount of advance deposit of tax shall be credited to the cash ledger
of the person.
In case of construction and real estate sector, contractor or developer, any contract or project
which can be completed within 90 days can apply for the nonresident registration provided the
fixed place of business is not available or place is not available for carrying out ordinary
business. However, it can be noted that the registration can only be available if there is no fixed
place of business of the contractors and developers.
Example: Mr. A, a resident of Bihar provides specialized industrial painting services at following
locations:
Expected
Registration Registration Registration
Supplies to States completion of
under CGST under IGST under SGST
services
Doing projects
Bihar on regular Regular Regular Regular
basis
Casual
Same as Same as
Gujarat Next 60 Days Taxable
above above
Person
Same as Same as
Rajasthan Next 180 Days Regular
above above
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Casual
Same as Same as
Karnataka Next 15 Days Taxable
above above
Person
Casual
Inter-state Sale Same as Same as
- Taxable
from Karnataka above above
Person
Q13: What if we close one construction site in a state and start another site. What will be the
procedure to change or amend the details in registration?
As per clause 20 of the Model Law, in case of amendment or changes in the registration,
be a change in place of registration or any other details, a person shall be required to inform
the proper officer of any changes in the information furnished at the time of registration.
The time limit for informing such changes has not been defined in the Model Law.
The proper officer, on the basis of information furnished on the amendments will approve or
reject such amendments. Before rejecting the application for the amendment, the proper
officer shall issue a notice to show cause and will provide an opportunity to person being heard.
It can be noted that any approval in amendment in the registration under CGST Act / SGST Act
shall be deemed to be the changes and amendment in the registration under SGST Act / CGST
Act as the case may be.
However, it is expected that for changes in some of the particulars of the registration which will
be prescribed, approval from the proper officer shall not be required and the registered person
can change such particulars without any hassle.
Q14: If I am providing construction services in different States, whether single centralized
registration like we currently have in service tax can be taken under GST or will I have to get
registered in all the states like we currently do under VAT?
As per the clause 19 of the Model GST Law, every person who is liable to be registered under
Schedule III of this Act shall apply for registration in every such State in which he is so liable
within thirty days from the date on which he becomes liable to registration. Thus if the
contractor or the developer provides the construction services in the different states, it shall be
liable to get registered in all such States where the services are to be provided. So effectively
you have a PAN India CGST and IGST numbers and state specific SGST number.
Q15: I am providing construction services at different sites within the same state. How many
registration numbers would be required to be obtained in the state?
For multiple sites within the same state, it may be possible to have the single SGST
registration apart from the Centralized CGST and IGST registration.
Q16: If we close a construction site work and do not intend to take up registration in that
state again in the near future, will it be possible to close the registration by surrendering the
19
same in that state to avoid doing compliances for that state ? Whether Proper officer can
cancel the registration at any time on his own?
As per the clause 21 of the model law, the proper officer may, either on his own motion
or on an application filed by the person cancel the registration,
The business has been discontinued, transferred fully for any reason including death of the
proprietor, amalgamated with other legal entity, demerged or disposed off.
There is any change in the constitution of the business.
The person registered is no longer liable to be registered under the Schedule III.
The Proper Officer may also cancel the registration as he may deem fit in case of:
The registered person has contravened provisions of the Act.

A person paying tax under Composition Levy has not furnished returns for three
consecutive tax periods.
Any taxable person has not furnished returns for a continuous period of six months.
Any person who has taken voluntary registration has not commenced business within six
months from the date of registration.
Proper Officer can also cancel the registration with retrospective effect without issuing any
notice or opportunity of being heard if in case registration has been obtained by means of fraud,
willful misstatement or suppression of facts
Further Proper Officer cannot cancel the registration without giving a notice to show cause and
without giving the person a reasonable opportunity of being heard.
However it may be noted that the cancellation of registration shall not affect any liability of
taxable person to pay tax for a period prior to the cancellation. It is further relevant to note that
the registered person who seeks the cancellation would be required to pay an amount,
equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in
semifinished or finished goods held in stock on the day immediately preceding the date of such
cancellation.
Q17: For a person supplying services & goods in different States, whether procedure for the
cancellation to be followed for all the registrations?
As per Clause 21 of the Model Law, cancellation of registration under the CGST Act / SGST
Act shall be deemed to be a cancellation of registration under the SGST Act / CGST Act. Hence,
if a contractor or developer cancels the registration in one State or registration under CGST, all
other registration applied in different States may be cancelled. Some proper clarification may
be required in this regard from the government as this may lead to practical difficulties.
20
Q18: What if the authority has cancelled my registration on their own? Can I apply for
revocation of cancellation?
As per clause 22 of the Model Law, any person who has applied for the cancellation of
registration, may apply for revocation of cancellation of the registration in the prescribed
manner within thirty days from the date of service of the cancellation order. The proper officer
may revoke cancellation of the registration or reject the application for revocation for good and
sufficient reasons and shall not reject the application for revocation of cancellation of
registration without giving a notice to show cause and without giving the person a reasonable
opportunity of being heard. It can further be noted that the revocation of cancellation of
registration under the CGST Act / SGST Act shall be deemed to be a revocation of cancellation
of registration under the SGST Act / CGST Act. Hence, if an authority revokes the cancellation
of registration in one State or registration under CGST, all other registration cancelled in
different States shall be revoked and will be reregistered.
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Chapter :- 4 - Taxable Supply of Goods & Services
Q19: Does the model law define what a supply is?
Meaning and scope of supply is defined in the clause 3 (1) of the draft Model Law. It includes
all form of supply of gods or services made for a consideration such as,
Sale
Transfer
Barter
Exchange
License
Rental
Lease
Disposal
Importation of service (whether for consideration or not)
Further Schedule I is specified where even if the supplies are effected without consideration
shall be treated supply and included in the scope of supply. The list of matters to be treated as
supply without consideration as per Schedule I is listed as below,
Permanent transfer / disposal of business assets.
Temporary application of business assets to a private or nonbusiness use.
Services put to a private or nonbusiness use.
Assets retained after deregistration.
Supply of goods and / or services by a taxable person to another taxable or nontaxable
person in the course or furtherance of business.
It can be noted that the meaning and scope of supply is very exhaustive. It includes almost all
types of construction services including construction of residential or commercial construction,
BOT projects, Turnkey Contracts, EPC Contracts, land development projects etc. and the
transactions covered under transfer of rights for movable & immovable and tangible &
intangible goods.
It is also relevant to note that in case of barter exchanges i.e. the agreements where the
developer / builder transfers some of the units to the land owner in lieu of the land
consideration shall also be subject to supply of goods or services. Transfer of Development
Rights (TDR) may also be treated as supply in case of such transfers from land owner to
developer or builder looking to the current wide definition of service. It will also include all the
exchanges where the land owner has agreed to lease the premises for a specific period to the
contractor relating to the construction cost.
22
Transfer of land
Joint Development Agreement

Developer / Land
Transfer of Land Rights
Builder Owner
Transfer of Units in form of

Consideration for land
Q20: What supplies are subject to GST in the construction or real estate sector?
As definition and scope of supply is very wide which includes almost all types of
construction services including construction of residential or commercial construction, BOT
projects, Turnkey Contracts, EPC Contracts, land development projects etc. and the transactions
covered under transfer of rights for movable & immovable and tangible & intangible goods. It
would also include the lease, renting and license agreements entered by the builders and
developers.
As per the current structure of taxes the Joint Ventures (JV) entered by the different developers
and builders for a project whether incorporated or not are also subject to service tax. As per
departments circular, if any member of such JV are availing any services from or providing any
services to JV, the same shall also be subject to service tax. The same scenario is also likely to
be continued in case of GST against supply of goods and services as per the suggested Model
Law. Such unincorporated JVs are liable to be registered and included as a person liable under
the GST as per the clause 2 (74) of the Model GST Law. Some of the examples for the
transactions which may be treated as supply under construction and real estate sector subject
to some conditions are represented as below:
Example:
Transfer of free units by builder to land owner.
Sale of units by land owner.
Transfer of Development Rights.
Transfer of tangible goods to be used in construction works.
Temporary transfer of tangible goods to be used in construction works.
Supplies by unincorporated associations / ventures to members and vice versa.
23
Transfer of rights to use the intangible assets.

Mere Movement of goods from one site to another for consumption or use
Q21: Whether there can be any supplies of goods or services at the construction site where
no consideration is charged directly or indirectly which can be subjected to GST?
Under the GST Model Law, supply would normally comprise of transactions involving
consideration. Thus the focus would continue to remain on supplies in the form of sale in
majority of the cases. However Schedule I is specified under the definition of Supply where even
if the specified supplies are effected without consideration, they shall be treated as supply and
shall be included in the scope of supply. The list of matters to be treated as supply without
consideration as per Schedule I is listed as below,
Permanent transfer / disposal of business assets.
Temporary application of business assets to a private or nonbusiness use.
Services put to a private or nonbusiness use.
Assets retained after deregistration.
Supply of goods and / or services by a taxable person to another taxable or non-taxable person in
the course or furtherance of business.
Q22: Can you give some examples of what all supplies can get taxed without consideration?
Lets now try and see what all supplies can be covered under each of the above heads from
a construction perspective :
Supplies without consideration as per Examples
Schedule I
Permanent transfer / disposal of Disposal of old machinery at construction site
business assets. without receipt of any consideration.
Donation of some assets at site.
Temporary application of business assets to a Use of office assets for personal use like
private or non-business use laptops, mobiles, site vehicles
Services put to a private or non-business use Services of an architect or an interior designer
working in a company being rendered for the
house of managing director
Assets retained after deregistration Closure of operations in a state
Supply of goods and / or services by a Supply of Free Issue Materials by client to
taxable person to another taxable or contractor or from contractor to sub-
nontaxable person in the course or contractor
furtherance of business Supply of goods for Job work unless the same
is exempted u/s 43A
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Movement of Plant and Machinery from one

site to another in different states
Return of goods to Head office after closure of
a construction site in a different state
Here it can be prominently marked that it is the last entry which may become the bone of
contention as it seeks to encapsulate under the sun almost all business transactions where no
consideration is involved making the usage of word consideration u/s 3(1) meaningless. Besides
it even covers supplies to nontaxable persons if in the furtherance of business.
Q23: Under the current system, there is lack of clarity while paying VAT and Service Tax as
per the actual method as the department would always have the tendency of questioning or
at times even rejecting the value as selfdeclared by the contractor ? What would happen
under GST? Whether the contract of construction and other works contracts shall be subject
to supply of services or supply of goods? Whether there are any deeming provisions under
GST?
GST marks a paradigm shift in the age old distinction between goods and services which have
led to several disputes in the past. As far as the construction activity is concerned, whether it is
construction of complex by a builder or construction of any industrial civil structure by a
contractor, under GST the same is deemed to be a service as per the deeming entries listed
under Schedule II Matters to be treated as Supply of Goods or Services.
Q24: Which are the supplies covered under Schedule II as referred to in the earlier question?
Transactions covered under Schedule II as a supply of services :
A. Any transfer of goods or of right in goods or of undivided share in goods without the
transfer of title thereof, is a supply of services.
B. Any lease, tenancy, easement, licence to occupy land is a supply of services.
C. Any lease or letting out of the building including a commercial, industrial or residential
complex for business or commerce, either wholly or partly is a supply of services.
D. Any treatment or process which is being applied to another persons goods is a supply of
services.
E. Goods held or used for the purposes of the business are put to any private use or are
used,
or made available to any person for use, for any purpose other than a purpose of the
business is a supply of services.
F. Renting of immovable property.
25
G. construction of a 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 before its first occupation, whichever is earlier
H. Temporary transfer or permitting the use or enjoyment of any intellectual property right
is a supply of service.
I. Development, design, programming, customization, adaptation, upgradation,
enhancement, implementation of information technology software is a supply of service.
J. Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to
do an act is a supply of service.
K. works contract including transfer of property in goods (whether as goods or in some other
form) involved in the execution of a works contract
L. Transfer of the right to use any goods for any purpose (whether or not for a specified
period) for cash, deferred payment or other valuable consideration is a supply of service.
M. Supply, by way of or as part of any service or in any other manner whatsoever, of goods,
being food or any other article for human consumption or any drink (other than alcoholic
liquor for human consumption), where such supply or service is for cash, deferred
payment or other valuable consideration.
Transactions covered under Schedule II as a supply of goods :

a. Any transfer of the title in goods is a supply of goods.
b. Any transfer of title in goods under an agreement which stipulates that property in goods will pass
at a future date upon payment of full consideration as agreed, is a supply of goods.
c. Where goods forming part of the assets of a business are transferred or disposed so as no longer
to form part of those assets, whether or not for a consideration, such transfer or disposal is a
supply of goods.
d. Where any person ceases to be a taxable person, any goods forming part of the assets of any
business carried on by him shall be deemed to be supplied by him in the course or furtherance of
his business immediately before he ceases to be a taxable person, unless
i. the business is transferred as a going concern to another person; or
ii. the business is carried on by a personal representative who is deemed to be a taxable
person.
e. Supply of goods by any unincorporated association or body of persons to a member thereof for
cash, deferred payment or other valuable consideration is a supply of Goods.
Q25: Is the declared list of services as above anywhere different from the declared list under
the current service tax law?
As far as construction sector is concerned there are certain marked differences :
26
a. Construction of complex and works contracts shall now be treated as services

irrespective of the element of goods involved in the contract. Hence the need to
split the billing for offering to different authorities goes away. To illustrate with an
example :
Mr. B is doing a works contract for Mr. C wherein the price of the contract is Rs.100/
involving both labour and material. At the stage of raising its first invoice i.e. RA Bill
No. 1 of Rs. 20/, Mr. B would charge appropriate CGST (say 10%) and SGST (say
10%) on the total basic value. That is Rs. 2 as CGST and Rs. 2 as SGST (being 10% of
the bill value of Rs. 20/).
If we go further, even if the contract contains a breakup of pricing stating that Rs.
100 is broken into Rs. 45 towards labour and Rs. 55 towards materials, it would
make no difference to the charge of SGST and CGST which would continue to remain
to be on the total basic value as calculated above in case of RA Bill No. 1.
b. For Construction of complex for sale in the capacity of a developer / builder now
there is an additional breather in the form of relief from payment of GST if no
consideration is received before the first occupation i.e. the occupancy certificate
even though the completion certificate gets delayed.
Q26: How a works contract is defined under the GST model Law and how is it different from
the current definitions under VAT and Service Tax laws?
Works contract under the Model GST Law has been defined as below :
(107) works contract means an agreement 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;
Our observations on the new definition are as under :
It can be noted that in the above definition of works contract, the condition of transfer of
property in goods now stands removed which would make even pure labour contract being
classified as a works contract. Further it can be noted that the new definition has included the
word fabrication (which was not included in the definition of works contract as per the service
tax laws) with an intent to comprehensively cover all onsite related activities under one
umbrella. Further the words maintenance seems to be a big miss out from the definition and
seems to be an inadvertent lapse on behalf of the drafter which he may like to make up in the
final version. It may also be noted that the concept of original works and completion services
are now not part of the new definition. However, as per the Para 5(2) of the Schedule II, the
expression "construction" includes additions, alterations, replacements or remodeling of any
existing civil structure. Hence all the alterations and repairing of any building are included under
a single term of construction.
27
Q27: How is the life of builders and developers going to be different under the new GST
model?
Under GST construction of a 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 before its first occupation whichever is earlier will be treated as service.
The expression "competent authority" means the Government or any authority authorized to
issue completion certificate under any law for the time being in force and in case of non
requirement of such certificate from such authority, from any of the following, namely:
i. an architect registered with the Council of Architecture constituted under the Architects
Act, 1972; or
ii. a chartered engineer registered with the Institution of Engineers (India); or
iii. a licensed surveyor of the respective local body of the city or town or village or
development or planning authority;
GST shall not be applicable on the sale of units of complexes after completion certificate or
before its first occupation whichever is earlier. Hence, in case the first occupancy is proved, the
relevance of the completion certificate shall be nullified. However, no mechanism seems to
have been provided under the suggested Model Law to prove the first occupancy, which may
again create some complications unless the rules prescribe something.
Comparing the current tax structure under service tax and the Model GST Law, both the laws
have excluded the sale of units of the complexes after the completion certificate as the same
would amount to sale of immovable properties. But when we compare the current structure
under VAT with the Model GST Law, we find a difference that under VAT the taxability would
arise only from the date the agreement with the customer is entered into as per the Apex court
judgement in the case of L&T (M/s Larsen & Toubro Limited & Anr. vs. State of Karnataka & Anr.
[2013 VIL03SCLB]). However under GST the date when the agreement with the customer is entered
into is not at all relevant.
Further, comparing the new definition of services is very extensive and includes anything which
is not a goods and thus even sale of immoveable properties. For better understanding, the
definition of goods and services is stated as below,
(48) goods means every kind of movable property other than actionable claim and money but
includes securities, growing crops, grass and things attached to or forming part of the land which
are agreed to be severed before supply or under the contract of supply;
Explanation. For the purpose of this clause, the term moveable property shall not include any
intangible property.
(88) services means anything other than goods;
Explanation: Services include intangible property and actionable claim but does not include
money.
28
As per the above stated definition, goods include every kind of movable properties and the
services include everything which is not a goods, hence such definition of services is too
extensive and exhaustive which also includes the transactions of sale of immovable properties.
Further there is no explanation added to the definition of services to exclude the transaction of
sale of immovable properties. It is a suspect that whether such inclusion is with the intention
to cover the sale of land within the ambit of GST. However we do believe that the government
would be coming out with some way to allow businesses take deduction towards the value of
land.
Q28: What are the other declared services that could be relevant for the construction sector
under the new GST model?
Some of the other relevant services are :
Right to Use Goods and Intellectual Properties Right

There have always been doubts as far as taxability of leasing, hiring, rental of plant, machinery
and equipment is concerned. The service tax department would always tax it as a service
however the VAT department would prefer to include it as deemed sale of goods to tax it under
VAT. Hence there was always a confusion on part of the transferor, whether to pay service tax
or VAT.
To ensure ease and to remove the earlier difficulties, such transfer of right to use for any
purpose is included as services under the draft Model GST Law.
In case of transfer of intellectual property related services whether be a temporary or
permanent transfer shall be considered as a supply of service. It is interesting to note that the
definition of Intellectual Properties Rights has not been defined under the suggested Model GST
Law besides the fact that the constitution of India read with some of the landmark apex court
judgements have held such rights as goods.
Leasing & Renting of Immovable Properties
As per para 2(1) of the Schedule II, Any lease, tenancy, easement, license to occupy land is a
supply of services.
As per Para 2(2) of the Schedule II, Any lease or letting out of the building including a
commercial, industrial or residential complex for business or commerce, either wholly or partly,
is a supply of services.
These paras in the Schedule II seem to be identical. However, under the first para renting or
leasing of any immovable property will be treated as supply of services be it residential or
commercial. But the second para seems to include renting or leasing of building for business or
commerce.
29
Q29: Whether I can split up the construction project into supply of goods and supply of
services in order to manage the same properly? How will the supplies be taxed in such case?
In the current service tax and VAT Laws, in order to avoid the cascading effects of the taxes,
arrangements are being made in order to optimize the overall indirect tax structure. One such
arrangement being splitting up the contract into material and labour in order to avoid double
taxation effect due to overlapping effect of VAT and service tax.
The moot question remains, whether the splitting of contracts would still be relevant under the
GST Laws. Under GST, deeming the construction activity as a service, a single rate (CGST+SGST)
would be levied on the total services supplied. It may however be interesting to note the
scenario where goods involved in the execution of works contract are getting taxed at a rate
lower than the rate of tax applicable to construction services. This may be a good enough reason
to split and pay tax on supplies of material at a lower rate. The fact that input tax credit for the
construction of immovable property (other than Plant and Machinery) would not be available
to the ultimate recipient would make it even more interesting from a contractees point of view
to device ways and means to save on the taxes. Besides splitting may lead to the contractee
getting some of the GST credits which had not been available in case of a composite contract.
Q30: I have deducted cancellation charges from the advances received from the customers
who have cancelled the agreement to buy a complex. I have also forfeited a deposit of a
contractor on account of penalty for inferior quality of construction. Whether such charges
and penalty shall be subject to GST?
As per the Model GST Law, agreeing to the obligation to refrain from an act, or to tolerate
an act or a situation, or to do an act is a supply of service. Similar provision also exists under the
current service tax law.
Hence in such cases where the cancellation charges are being deducted by the builder or the
developer such charges shall form part of a service as per the Model GST Law. Further in case
of penalty being deducted by the contractee from the contractor for reasons being quality, late
completion, violation of terms of contract, etc. shall also be subject to GST. It would also include
the refundable deposit being forfeited and nonrefundable deposits when adjusted against the
dues. However, refundable deposits where the obligation is on the contractee to refund after
the stipulated period shall be out of purview of the GST. Some of the transactions of such
instances are as below,
Advance forfeited for cancellation of agreement to provide a service.
Compensation on termination of business agreements.
Forfeiture of security deposit for damages done by service receiver in course of receiving
of services.
Liquidated Damages.
Noncompete fees for agreeing not to compete.
Forfeiture of refundable security deposit for a reason.
Cancellation charges being charged by airlines, hotels etc.
30
Consideration for nonappearance in a court of law or withdrawal of suit.

Demurrage charges or detention charges.
However one may very well argue that the word consideration cannot be extended to include
such damages and penalties which would of course be subject to litigation by the department.
Q31: I have started the construction of a building where after completion of 25%, I have
started allotting and selling the units to the customers. Whether GST shall only be applicable
on the construction cost of remaining 75% or GST will be accounted on total 100% of the
construction?
As per the Model GST Law, it can be interpreted that the GST shall be levied on total
construction cost for the units allotted before the completion certificate or the first occupancy
whichever is earlier. However, in case of Larsen & Toubro Limited vs. State of Karnataka
reported
at 2013VIL03SCLB where the Supreme Court has held that the taxable value is the value of
goods at the time of transfer and not the cost to the contractor. It was also held that the cost
of construction from the date of agreement can only be taxed as works contract. The relevant
para of the case is cited as below,
115 It may, however, be clarified that activity of construction undertaken by the developer
would be works contract only from the stage the developer enters into a contract with the flat
purchaser. The value addition made to the goods transferred after the agreement is entered into
with the flat purchaser can only be made chargeable to tax by the State Government.
Hence, the issue is still open under the suggested Model GST Law and is likely to be addressed
by the government in the final GST law.
31
Chapter :- 5 - Exemption & Negative List

(including Supplies to SEZ)
Q32: Whether any exemptions are available for developers / builders or the contractors /
subcontractors?
As per the current Draft Model GST Law, there are no specific exemptions available for
developers / builders / contractors / subcontractors. It is expected that the exemption to
various sectors will be notified by the GST Council with the recommendations from the State &
Central representatives through the notification.
However, as per clause 10 of the Draft Model Law, the powers are rested with the Central and
State Government to grant an exemption, if it is necessary in the public interest to do so.
As per clause 10(1) of the Model GST Law, If the Central or a State Government is satisfied that
it is necessary in the public interest so to do, it may, on the recommendation of the Council, by
notification, exempt generally either absolutely or subject to such conditions as may be
specified in the notification, goods and/or services of any specified description from the whole
or any part of the tax leviable thereon.
As per the clause 10(1) of the draft Model GST Law, If the Central or a State Government is
satisfied that it is necessary in the public interest to do so, it may, on the recommendation of
the Council, by special order in each case, exempt from payment of tax, under circumstances of
an exceptional nature to be stated in such order, any goods and/or services on which tax is
leviable.
Thus, it is expected that under the GST structure, there will be two types of exemptions
available, which will be notified by the GST council with the recommendations from the Central
& State Government. The two exemptions will be, an absolute exemption where in one case
claiming the exemption will be compulsory in nature on the specified supplies of goods and
services subject to the conditions as may be prescribed and in another case will be an
exceptional exemption where availing the benefit of an exemption will rest with the contractor
or developer or the supplier.
Q33: Whether any basic exemption is available to a small contractor or real estate developer?
If yes, whether only the component of labour would be considered while arriving at the
exemption threshold or the total billing?
32
As per the Model GST Law, a person who is required to be registered under this Act shall
not be considered as a taxable person until his aggregate turnover in a financial year exceeds
Rs. ten lakh [five lakhs in case of North East States].
The exemption is available for the small scale suppliers of goods and services. This exemption
will also be available to contractors / sub contractors and Real Estate Developers.
For the purpose of arriving at this exemption, aggregate turnover as defined in the clause 2(6)
of the Draft Model GST Law has to be considered, which states, aggregate turnover means
the aggregate value of all taxable and nontaxable supplies, exempt supplies and exports of
goods and/or services of a person having the same PAN, to be computed on all India basis and
excludes taxes, if any, charged under the CGST Act, SGST Act and the IGST Act, as the case may
be.
Further, for the purpose of calculating exemption threshold Aggregate turnover is to be
considered, which means the aggregate value of all taxable and non taxable supplies, exempt
supplies and exports of goods and / or services of a person having same PAN on all India basis
should be considered.
It is relevant to note that the coverage seems to be very wide and extensive which includes the
total turnover of any contractor or the developer. Thus, in case of a contractor providing the
labour services along with the supply of goods, the total turnover, i.e. the turnover of goods
and the turnover of labour services will be considered for the purpose of the exemption. This is
very much unlike the current regime where labour turnover is required to be assessed under
Service Tax and material turnover under VAT and the threshold limits are separately assessed.
Exemple: Mr. A of Maharashtra has provided the following supplies during the financial year:
Turnover During Aggregate Turnover for

the Financial Calculating Exemption
Supplies Status
Year under GST
Labour supplied at Bihar 2,00,000 Taxable 2,00,000
Materials supplied at 3,00,000 Taxable 3,00,000
Gujarat
Material & Labour
5,00,000 Taxable 5,00,000
Supplied within the Local
State i.e. Maharashtra
Export Supplies 50,000 Exempt 50,000
Man Power Supplies to SEZ 2,50,000 Exempt 2,50,000
Total 13,00,000 13,00,000
As per above example, it is very clear that Mr A under the present system of VAT and Service
Tax was not required to obtain any registrations, however as far as GST is concerned, he would
33
be required to obtain registration in each of the states where he is doing his operations as the
combined turnover of all the states crosses Rs. 10 Lacs.
Q34: Whether the ongoing exemptions under service tax / vat would be available under
GST? If no, whether the government would refund such taxes?
In the present law, for builders / contractors, exemptions are available under service tax
for Projects such as construction of roads, construction services rendered to railways,
construction of bridge, construction of dams and canal, construction of water treatment plant,
low cost Housing under the schemes notified by the Government, etc. are exempt from the levy
of service tax subject to the conditions as may be prescribed. However these projects do not
enjoy any exemption under VAT. The government has made its intentions very clear that the
number of exemptions under GST would be very limited as it negatively impacts transfer of
seamless input credits. Hence except for few major infrastructure projects, other projects may
be brought within the GST net.
GST is an integrated tax on goods and services. There is also a view from a section of intellectuals
that the exemption in case of payment from CGST may be given while the SGST may be
applicable on the same and no relief may be granted as the same are taxable under different
VAT Laws. However government will also make all efforts to ensure uniformity of exemptions
under CGST, IGST and SGST laws.
Further, certain special area based exemptions also existed such as in Himachal Pradesh,
Jammu, Assam, etc. under the Central Excise Laws. After the introduction of GST, the
exemptions, remissions, etc. related to such industrial incentives would be converted into cash
refund schemes.
As far as the ongoing projects are concerned especially those having long periods like Low Cost
Housing, roads, etc. in the present law, the continuity to such limited extent are yet to be
clarified under GST. It is expected that the specific exemption may be notified to cover such
ongoing projects. It is difficult to perceive government notifying any cash refund mechanism to
safeguard such ongoing projects.
Q35: Whether exemptions as available to the contractor under GST would also be available
to the subcontractor?
As per the present laws, under service tax, for the works contract services, an exemption
is available to the subcontractor if the main contractor is exempt from levy of service tax. In
several States For e.g. Maharashtra, etc. where subcontractor can claim exemption by issuing
the specified form if the main contractor has discharged the VAT liability on the total contract
value.
34
Exempt Works Exempt Works

Contract Contract
Client / Main Sub-
Developer Contractor Contractor
Service tax Exemption / Exemption Extended to

VAT Paid on Total Sub-Contractor Also
Turnover
As per the current Draft Model GST Law, there are no specific exemptions available for
contractors under GST and hence no such exemptions will be available to subcontractor also.
Further it is relevant to note that the liability in case of contractors and subcontractors under
the GST will be severally independent.
It is also relevant to note that the GST is a tax which is charged on every stage of trade and
hence subcontractors will charge GST from principal contractor and in turn the principal
contractor, will get the benefit of input tax credit on the GST paid to subcontractors.
However, the Central / State Govt. on the recommendation of GST Council may notify certain
exemptions from whole or part of levy of tax. The particulars / details of these exemptions on
contractor / subcontractor, if any, can only be known if they are prescribed by the respective
Governments.
Q36: Whether collection of Toll charges would be exempt under GST?
In GST regime, fewer exemptions will be allowed in order to make one market and for
maintaining continuity of tax chain, under these circumstances, toll charges may not be
exempted.
Q37: Whether any negative list is specified under model GST Law?
As of now, no negative list is specified under GST law. However, the law specifically provides
that the Central or State Govt., if satisfied and on the recommendation of GST Council may
notify and exempt any goods / services from whole or part of the tax leviable thereon. Here it
is relevant to note that the provisions relating to the absolute exemption is incorporated in the
GST Model Law, which is similar to the negative list. Hence, it is expected that instead of a
negative list, the GST Council may notify list of absolute exemptions i.e. compulsory exemptions
may be notified.
35
Q38: Will the government continue exemptions like construction of road, bridge, railways,
low cost housing under GST?
There is no specific mention about continuation of any exemptions like construction of
bridges, railways, low cost housing etc. under the Model GST Law as of now.
However, the Central Government or State Government under recommendation of GST Council
and in public interest have power to notify any goods / services exempt wholly, or partly from
tax leviable thereon.
It is expected that notification in this regard will be issued after constitution of GST Council, if
found necessary in public interest.
Q39: Will the exemptions be treated as Zero rated for the purpose of claiming refund of the
Input Tax Credit on procurements for the exempted projects?
Under GST law, exempted items will not be treated as zero rated for the purpose of claiming
refund of input tax credit on procurement for the exempted projects. Thus, there may be lapse
of some of the input credit paid on inward supply of goods or services.
As per Model GST Law, only exports are zero rated supplies and refund of inputs can be claimed
only in case of exports apart from cases where refund arises due to an inverted duty structure.
The exemptions for construction of roads, bridges, railways, low cost housing under GST, if
introduced, by the Government, will be nontaxable category and refund will not be allowed on
input on procurements for the same.
In case of Special Area Scheme (SAS), after introduction of GST, the exemptions, remissions, etc.
related to industrial incentives may be converted into cash refund schemes.
Q40: Whether supplies to government are taxable or exempt?
Any supplies to Government for goods and services will be taxable and no exemptions, as
of now, have been prescribed for the same. The Central or States Govt. may provide after
recommendation of GST Council certain items, which will be non taxable. However, nothing
has been notified as of now. Even in the present law of service tax / VAT / excise, over a period
of time supplies to the Government are gradually getting taxable and same trend is expected
to be continued under GST.
Q41: Whether every State will have similar provisions and exemptions for GST law?
There will be one CGST / IGST law which will be applicable to all the taxable persons as a
Central tax. Each state will come out with its own SGST law, however, the provisions /
compliances are expected to be same for each State as the same will be notified by the GST
36
Council. States after recommendation from GST Council can make few changes in the list of
exempted items. However, the intention of GST is to make minimal exemptions and similar law
all over India and hence there will be no specific area based exemptions in any state as per
Model GST Law.
Q42: Whether the export supply and supplies to SEZ would be taxable? What will be the
impact on ongoing exemptions for such supplies?
Under the present service tax laws, export supplies are fully exempt and treated as zero
rated supplies. In case of supplies to SEZ, two procedures are specified for the exemptions, one
is the abinitio exemption where the total procurement by the SEZ developer is exempt and the
other is by way of refund, where the SEZ developer procures inputs and services with the tax
payment and claims refund of the same. Under the VAT laws, different procedures are specified
by the different States as per their laws.
It is expected that under the GST regime, such supplies to SEZ may be regarded as zero rated
supply where the taxable person i.e. contractor or the subcontractor may supply goods or
services to the SEZ developer with the zero rate. The logic behind the zero rated supply might
be that the exporter or the contractor of service can avail the input tax credit against the liability
arising out of his other taxable supplies or claim refund of the same.
Thus, the supplies to SEZ and export supplies will not attract GST, however, it may be interesting
to note once the final law is released which export incentive scheme will be notified by the GST
Council, which may have impact on the total export of the country and may prove ease in export
supplies.
37
Chapter :- 6 - Time of Supply
Q43: What is continuous supply of service? Whether construction and real estate services will
be considered as the continuous services?
The definition of Continuous supply of goods and service is defined under the clause 2(30)
& 2(31) as under,
continuous supply of goods means a supply of goods which is provided, or agreed to be
provided, continuously or on recurrent basis, under a contract, whether or not by means of a
wire, cable, pipeline or other conduit, and for which the supplier invoices the recipient on a
regular or periodic basis;
continuous supply of services means a supply of services which is provided, or agreed to be
provided, continuously or on recurrent basis, under a contract, for a period exceeding three
months with periodic payment obligations and includes supply of such service as the Central or
a State Government may, whether or not subject to any condition, by notification, specify;
The above definition would include any contract having construction period of more than three
months and having terms of periodic payments. Hence, almost all types of construction
agreements / contracts will be covered under continuous supply of service taking a view that in
most cases, the time span is always higher than three months. It is further relevant to note that
all the supplies to the contract, where the contract is entered between the contractor or the
developer and the supplier of various materials such as plumbing and sanitary, electrical items,
steel, cement, tiles, etc. for supplying the construction materials on a regular basis may be
considered as the continuous supply of goods.
Further, it is important to remember that construction of a complex, building, civil structure or
a part thereof, including the complex or building intended for sale to a buyer wholly or partly is
supply of service as per the Model GST Law. Thus, all the construction and real estate services
will be included as continuous supply of services irrespective of the value of material involved.
Q44: When will the vendor be required to issue bill or invoice, if he has supplied the
construction materials to me in normal course of supply and in continuous supply?
In normal course of supply of goods, as per the clause 12 (2) of Draft GST Model Law, the
time of supply of goods shall be the earliest of the following dates,
a. (i) the date on which the goods are removed by the supplier for supply to the recipient, in a case
where the goods are required to be removed or
38
(ii) the date on which the goods are made available to the recipient, in a case where the
goods are not required to be removed; or
b. the date on which the supplier issues the invoice with respect to the supply; or
c. the date on which the supplier receives the payment with respect to the supply; or
d. the date on which the recipient shows the receipt of the goods in his books of account.
In case of continuous supply, as per the clause 12(3) of the Draft Model GST Law, the time of
supply will be,
In case of continuous supply of goods, where successive statements of accounts or successive
payments are involved, the time of supply shall be the date of expiry of the period to which
such successive statements of accounts or successive payments relate. If there are no
successive statements of account, the date of issue of the invoice (or any other document) or
the date of receipt of payment, whichever is earlier, shall be the time of supply.
Example: Mr. A has supplied the plumbing items to the following contractors in normal course
of supply i.e. not a continuous supply,
Contractor Contractor Contractor Contractor Contractor

Supply Chain
I II III IV V
Date of Removal 21-Apr-17 NA 21-May-17 10-Jun-17 11-Jul-17
Date of Invoice 22-Apr-17 18-May-17 20-May-17 11-Jun-17 10-Jul-17
Date - Made available
21-Apr-17 16-May-17 26-May-17 16-Jun-17 17-Jul-17
to Recipient
Date on which recipient
records receipt of goods 27-Jun-17 25-Jul-17 23-May-17 10-Jun-17 12-Jun-17
in his books of accounts
Date of receipt of
20-Jun-17 21-Jul-17 10-Aug-17 09-May-17 30-Jul-17
Payment
39
Date on which
Date - Made Date of recipient records
Date of Date of
Time of Supply will be available to receipt of receipt of goods
Removal Invoice
Recipient Payment in his books of
accounts
Time of Supply 21-Apr-17 16-May-17 20-May-17 09-May-17 12-Jun-17
Example: Mr. A has supplied the Cement to ABC Ltd. as a continuous supply on daily basis,
Supply Chain Continuous Supply Contract for RMC

Contract
Time of issue of 1st to 30th April 1st to 31st May 1st to 30th June cancelled for
Statement continuous
supply
Month April May Jun Jul

Expiry Date of the
statement 30th April 31st May 30th June NA
Expiry Date of
successive payments 2nd May 30th May 5th July NA
Date of Invoice 18Apr17 07June17 02Jun17 17Jul17

Date of receipt of
04Apr17 10June17 04Jun17 19Jul17
Payment
Expiry Date of
Expiry Date of the Expiry Date of the Date of
Time of Supply will be successive
statement statement Invoice
payments
Time of Supply 30th April 30th May 30th June 17th July
Q45: If the construction and real estate services are considered as continuous supply of
services, then what will be the time limits for billings and invoices? When will I have to collect
the GST from the clients?
As per the Clause 13(2) of the Draft Model GST Law, the time of supply of services will
be,
a. the date of issue of invoice or the date of receipt of payment, whichever is earlier, if the
invoice is issued within the prescribed period; or
40
b. the date of completion of the provision of service or the date of receipt of payment,
whichever is earlier, if the invoice is not issued within the prescribed period; or
c. the date on which the recipient shows the receipt of services in his books of account, in a
case where the provisions of clause (a) or (b) do not apply.
It may be noted that government is yet to prescribe the days within which invoice is required
to be issued.
As per the Clause 13(3) of the Draft Model GST Law, In case of continuous supply of services,
the time of supply shall be
a. where the due date of payment is ascertainable from the contract, the date on which the
payment is liable to be made by the recipient of service, whether or not any invoice has
been issued or any payment has been received by the supplier of service;
b. where the due date of payment is not ascertainable from the contract, each such time
when the supplier of service receives the payment, or issues an invoice, whichever is
earlier.
c. where the payment is linked to the completion of an event, the time of completion of that
event;
Thus, under the construction or real estate services, where the date of payment or the
milestone of events is specified in the contract, such date will be the time of supply irrespective
of the date of invoice or payment . If the milestone for the event is not specified, the time of
supply will be the earliest of the date of issue of invoice or the receipt of payment. In certain
construction services such as finishing services, interior designing services, etc. where the
payment is only effected after the completion of such services, the time of supply will be the
completion of such service. The collection of GST has to be done at the time of receipt of
payment of services or the date of issue of invoices whichever is earlier.
Example: Mr. A has provided the following one time Architect services (not a continuous
supply)
Contract Contract Contract Contract Contract
Supply Chain
I II III IV V
Invoice issued within
Yes Yes No No NA
Prescribed time
Date of Receipt of Payment 22-Apr-17 22-Apr-17 20-Apr-17 30-Apr-17 30-Apr-17
Date of Issue of Invoice 10-Apr-17 30-Apr-17 26-Apr-17 26-Apr-17 NA
Date of Completion of
05-Apr-17 05-Apr-17 23-Apr-17 23-Apr-17 NA
Service
Date on which the recipient
01-Apr-17 01-Apr-17 30-Apr-17 30-Apr-17 10-Apr-17
shows receipt of services
41
Date on which
Date of Date of Date of Date of
the recipient
Time of Supply Issue of Receipt of Receipt of Completion
shows receipt
Invoice Payment Payment of Service
of services
Date for Time of Supply 10-Apr-17 22-Apr-17 20-Apr-17 23-Apr-17 10-Apr-17
Example: Mr. A has provided the following construction services:

Contractor Contractor Contractor Contractor Contractor
Supply Chain
I II III IV V
Contract Payment Payment to be Payment to be Payment
Terms made on 5th of made on 5th of No terms No terms due after
/ Event next month every month each testing
Month April April April April April
Date of Receipt of
Payment
Date of Issue of
Invoice
Date of
Completion of NA NA NA NA 05-Oct-17
Event
Date of Date of Date of
Contract Date of Receipt
Time of Supply Receipt of Issue of Completion
Payment Terms of Payment
Payment Invoice of Event
Date for Time of
05-Apr-17 03-Apr-17 20-Apr-17 20-Apr-17 05-Oct-17
Supply
Q46: Can I opt to pay GST on receipt basis rather than on RA Bill submission basis?
In the present service tax law, the option is available to small service provider having
turnover less than 50 lakhs in previous financial year where they can opt to pay service tax on
receipt basis rather than on invoice basis.
As far as the current Draft Model GST Law, is concerned, no such option is available for small
suppliers of goods and services. However, it is expected that provision similar to service tax may
also be brought in the GST Law, which may be notified through the GST Rules, by the GST
Council.
42
Q47: When and how do I account for GST for progressive payment contracts which involve
the issuance of certificate of work done at each stage of works (interim certificate)?
In case of the progressive payments where the completion certificate is relevant for
completion of all the events to the contracts, the time of supply shall be the issuance of the
completion certificate.
Example: In cases which involves the issuance of certificate of work done, if the certificate of
work done was issued on 12th June, and the invoice was issued after prescribed time limit, that
is on 9th July, the GST has to be accounted in the June month. However, if the invoice was issued
on 2nd July (within prescribed time limit from the date of issuance of certificate of work done),
the GST would still be accounted in June as this is a case of continuous supply of service.
Q48: What would be the point of taxation in case of mobilization / initial advance released
by client? What would be the taxability for deduction of such advance in running bills?
Mobilization or the initial advance is normally released in lieu of deployment of contractor's
physical and manpower resources at a construction site until the completion of the contract.
Such advance is then deducted from the running bills submitted by the contractor as per the
terms of the contract.
As per the current Model GST Law, GST is to be paid on receipt of mobilization / initial advance
released by client provided no other payment due dates are mentioned in the contract.
Whenever the supplier receives advance, he has to pay GST at that time. On issuance of running
bills, the proportionate GST on the amount adjusted from mobilization advance shall be
deducted for the purpose of paying GST on running invoice.
Example: Mr. A has provided the following Construction services,
Mobilization RA Bill RA Bill RA Bill RA Bill

Particulars Total
Advance No. I No. II No. III No. IV
Amount of Advance 50,00,000 - - - - 50,00,000
GST Rate 20% 20% 20% 20% 20%
Basic Amount of Bill /
50,00,000 25,00,000 30,00,000 50,00,000 60,00,000 1,65,00,000
Advance
Deductions from Bill - 1,25,000 2,00,000 2,50,000 3,60,000 9,35,000
Adjusted towards
- 15,00,000 15,00,000 12,50,000 7,50,000 50,00,000
Mobilization Advance
Net Amount for GST 50,00,000 8,75,000 13,00,000 35,00,000 48,90,000 1,55,65,000
Amount of GST
10,00,000 1,75,000 2,60,000 7,00,000 9,78,000 31,13,000
Payable
Net Amount Payable
60,00,000 10,50,000 15,60,000 42,00,000 58,68,000 1,86,78,000
to Contractor
43
Q49: I have paid Mobilization Advance to a subcontractor. When will I be able to take the
credit of GST of the same against the liability due on the Mobilization advance received by
me from my client ?
For availing the credit on input services or the goods, the essential features are that such
credit should be reflected in the electronic ledger of the taxable person, proper invoice should
have been received, services should have been received and return has been furnished. Hence
as soon as the subcontractor makes the payment of GST on such mobilization advances, the
contractor would not be in a position to take the credit as the requirement of receipt of services
may not be fulfilled on that day.
Example: If the mobilization is paid in month of April, as soon as the GST payment is made by
the contractor and outward return is uploaded for GST, the same will be reflected in the
electronic ledger for April. However the services are completely provided only by August, hence
the availment of credit in such cases may have to be postponed to August due to the newly
found condition of proving receipt of services before claiming the credit.
It may be noted that such a condition does not exist in the current service tax regime.
Q50: What is the time of supply in case of sale of residential / commercial complexes if the
agreements with the buyers do not specify any time limit or the installments of the
payments?
As per the Draft Model GST Law, the construction of residential or the commercial complexes
will be included as supply of services provided that the sale is effected before the completion
certificate from the competent authority.
Further the services will be covered under the continuous supply of services, considering that
the time span for the completion of the construction is more than three months.
As per the Clause 13(3)(b), of the Draft Model GST Law, where the due date of payment is not
ascertainable from the contract, each such time when the supplier of service receives the
payment, or issues an invoice, whichever is earlier shall be the time of supply of service.
Hence if the developer or the builder in case where the agreement with the buyers do not
specify the date of payment for the installments or the time limit, the time of supply will be the
earliest of date of payment received from the buyers or the date of issue of invoices to the
buyers.
44
Example: Mr. A, Builder, has provided the following construction of residential complexes
services,
Particulars Buyer I Buyer II

Date of receipt of payment
15Apr17 25May17
Date of issue of invoice 10May17 05Apr17
Time of Supply of services Date of receipt of payment Date of issue of invoice
Date for time of supply 15Apr17 05Apr17
Q51: I have purchased a concrete batching plant on approval basis from the purchaser. When
will the seller account for GST and will I be able to take the credit?
As per the Clause 12(6) of the Model GST Law, If the goods (being sent or taken on approval
or sale or return or similar terms) are removed before it is known whether a supply will take
place, the time of supply shall be at the time when it becomes known that the supply has taken
place or six months from the date of removal, whichever is earlier.
Thus, in case if the goods are sent on approval basis, the time of supply will be the earliest of
the date of approval for the goods or the date of expiry of six months from the date of removal.
Hence, you will be able to take the credit accordingly after the time of supply is affected
assuming that invoice would be issued on that date.
Example: Mr. A has supplied the concrete batching plant to ABC Ltd. on sale or approval basis,
Date of receipt Date for

Date of Date of Date of Expiry Time of
Case of goods by Time of
Removal Approval of 6 months Supply
Recipient Supply
Date of
I 10Jul17 20Jul17 11Aug 09Jan18 11Aug17
Approval
17
Date of
II 14Jun 19Jun17 Awaited 13Dec17 13Dec17
Expiry of
17
6 months
Thus under the Case I, ABC Ltd., will be able to claim credit in the Aug month. However, the
credit cannot be availed under the case II as the approval is still awaited. Further even after
expiry of six months, for claiming the credit, he would need a proper invoice to be issued by the
supplier.
45
Chapter :- 7 - Place of Supply &

Future of Old Plannings in CST
Q52: What will be the impact of GST on high seas sales?
High Seas Sale Transactions (HSS) are exempted u/s. 5(2) of the CST Act, 1956. Under the
GST Regime, the exemption on high seas sale transaction is likely to be available with some
planning. However all the HSS which are at present exempt may not enjoy the exemption under
GST. Especially tax is likely to be attracted either under IGST or CGST/SGST as per the draft
model law for the supplies made from the custom port, custom bond and custom area
considering the location of supplier and place of supply provisions of draft GST model law.
Explanation I to section 2(c) of the model law speaks that all imports are deemed to be supplies
of goods and/or services made in the course of Interstate trade or commerce. Hence, the buyer
has to bear two taxes i.e. Basic custom duty and IGST (or CGST+SGST) in case of importation of
goods. If importer has imported the goods and the goods while they are lying in the bonded
warehouse are supplied to the contractor then the transaction would attract IGST if the place
of supply is in a different state and a combination of CGST + SGST if the place of supply is in the
same state .
The provisions of IGST and CGST/SGST shall not get attracted for the supplies made beyond 12
nautical miles and also for the supplies made before the commencement of journey of goods
from outside India or before it reaches the Indian territorial waters. Therefore in our view
certain supplies which are in nature of HSS are still not liable to tax either under the IGST or
CGST/ SGST Model Law. However challenge lies in understanding the definition of India .
Besides above, as far as works contracts are concerned which are deemed to be a service, any
such HSS in the course of execution of works contract, irrespective of the place of agreement,
place of transfer of risk may continue to be taxed in the state of destination, creating an
anomaly which may have to be challenged.
Q53: What will be the impact of GST on sale intransit?
Sales in transit transactions (SIT) currently enjoy exemption u/s. 6(2) of the CST Act, 1956.
The said transactions are commonly known as LR/RR sales transactions. Under the GST regime
such supplies would attract tax either under IGST or even under CGST/SGST depending on the
46
location of the supplier and the place of supply, whether in same or in different states. It is
therefore very important to determine the location of the supplier and the place of supply.
Example :
Lets take a case where A of Ahmedabad having principal place of business in Gujarat is giving
direction to V of Vadodara to deliver the goods to M of Maharashtra in Maharashtra. At present
A is issuing Form C to V of Vadodara and receiving Form E1 from V of Vadodara and also
receiving Form C from M of Maharashtra and claiming an exemption under the CST Act,1956.
Section 3 and 3A of the Model IGST Law provide when supplies are interstate and intrastate,
the key condition to determine the transaction is location of supplier and place of supply of
goods and/or services subject to section 5 and 6 of IGST Act. Therefore, it can be said that supply
of goods between V of Vadodara and A of Ahmedabad is liable to be taxed under SGST/ CGST
Law and supply of goods between A of Ahmedabad and M of Maharashtra will be liable to be
taxed under the IGST. So the exemption previously available to A is now not available under
GST. Therefore effectively A now has to pay tax under GST on his trading margins which was
earlier not getting taxed. The contractor / contractee will have to take cognizance of this
significant change as the old practice of making a LR / RR sale to the Contractee and taking back
the goods as free supplies to use the same in works contract cannot be continued under GST.
It would also be prudent to say that in the GST regime one has to take due care while
determining the nature of supplies. This is so as payment of tax under wrong head say
SGST/CGST instead of IGST or IGST instead of SGST/CGST will have severe implications. That is
one would have to apply for refund of taxes paid under wrong head after winning the battle of
unjust enrichment on one end and to pay the tax under the correct head with interest on the
other hand (Section 53 read with Section 35 (9) of CGST/SGST Act). The fact that every state is
interested in treating the supply as consumed in their territory would make the task of getting
refunds as a very tough one.
Q54: What will be the impact of GST on sale in course of import?
Sale in the course of import is exempted u/s. 5(2) of the CST Act, 1956. As discussed above,
in reply to the first question of this chapter, if supply of goods is completed prior to their
reaching the Indian Territorial waters, the same is exempted under the IGST Law. But the relief
of bringing the goods for specific Indian customer from outside India and claiming exemption
for the subsequent sale as sale in the course of import would not be available in the upcoming
era of GST. Therefore the contractor or the contractee will have to consider additional tax
implications in such cases.
Further we expect the final law to define the location of supplier of goods which would resolve
some of the confusions.
47
Q55: A. What will be the impact of GST on sale in course of interstate trade or commerce ?
Under the CST Act, 1956 the key criteria to determine whether the sale of goods is in the
course of interstate trade or commerce is the movement from one state to another. If there is
no movement, CST provisions do not come into picture at all irrespective of all other factors.
Further service tax being a central subject does not carry any concept of supply of service in the
course of interstate trade or commerce in its present form as irrespective of the state of
consumption, right over the revenue collection remains with the centre.
One big difference under GST is that movement is no more the criteria to determine the
taxability under IGST Act levying GST on interstate supplies of goods and/or services. There are
deeming provisions incorporated under the IGST Act which supersede the requirement of
movement of goods.
The key factors under GST to determine the place of supply of goods and of services are location
of supplier and place of supply.
Principles involved to determine Place of Supply of goods :
Particulars Place of Supply of Goods (Section 5)
Where supply involves movement of Location at which movement of goods
goods terminates for delivery
Where goods are delivered before or Principal place of business of third person (Sec
during their movement either by way of 2(78) the place which is mentioned in the
transfer of documents of title to the registration certificate)
goods or otherwise, to a recipient or any
other person on the direction of a third
person
Where supply does not involve Location of goods at the time of delivery
movement of goods
Installation / assembly at site Place of installation or assembly

Where the goods are supplied on board Location at which goods are taken on board
a conveyance, such as a vessel, an
aircraft, a train or a motor vehicle
In any other case not covered above Determined by law made by the Parliament in
accordance with the recommendations of the
Council
Separate provisions are made in the IGST Law for place of supply of goods and place of supply
of services. Therefore sale and purchase made on concessional rate against form C would no
more be available in GST regime. Hence, procuring goods by paying IGST at a significantly higher
rate
48
of say 1820% as compared to current rate of 2% may seem to be an extra cost unless the input
tax credit is offset against outward supply. Thus temporary effect on working capital
requirements is quite evident.
A. As to whether the Council has a right to enhance the scope of place of supply of goods and or
services where the IGST Model Law is silent?
Section 5(6) of the IGST Model Law provides for expanding the scope of provision for
place of supply of goods where the supply of goods cannot be determined in consonance with
sub section 2, 3, 4 and 5 of section 5 of IGST Model Law. On recommendation of council,
parliament has the power to determine such law. Unlike place of supply of goods, there is no
express provision in section 6 of the IGST model and therefore in our view scope of place of
supply of service cannot be enhanced on recommendation of council by parliament.
Q56: What will be the impact of GST on stock transfer transactions made within state and
outside the state?
The benefit of making stock transfer against form F to another branch within India without
paying any tax may now no more be available under GST regime. The scope of supply prescribed
in section 3 of the draft model law specifically covers transfer by a taxable person to a taxable
or a nontaxable person without consideration in the course of business as required to be
treated as supply and liable to GST. Therefore, stock transfer made between two branches of
different states would be liable to tax under the GST era. However, supplies made to a branch
within the state without having separate registration number as a business vertical does not
attract GST. The liability to pay GST on stock transfers would negatively impact the working
capital requirement of construction projects which have a long working capital rotation cycle.
Q57: Will there be any declarations of Cform, H Form or I Form or Fform prevalent in GST?
Provisions of draft GST model law do not have such provisions of sale or purchase against
declaration forms like C, H, I and F form. Therefore major supply of goods and services are
subject to tax under the upcoming GST Regime. Hence the requirement of these forms may be
done away in the GST Regime.
Q58: A. Whether the Tax planning through splitting of the works contract at the stage of
billing into supply of goods and supply of service will be permissible in GST regime?
Contractee or contractor currently engage in a lot of tax planning by splitting the contract
into supply of goods and supply of services in the present regime of VAT/CST and Service Tax.
49
Example :
If M/s. XYZ of Kerala has received the contract of supply, commissioning and erection of lift in
the state of Gujarat, the supply of goods made by contractor from Kerala and commissioning
and erection of lift in Gujarat, then the contractor as per the present law is liable to pay CST on
supply portion in the state of Kerala considering Section 2(g) of the CST Act, 1956. Interstate
works contracts are subject to tax under the CST Act if goods are moved from one state to
another pursuant to the contract of sale. Therefore contract of supply of goods and supply of
services can be spilt up in the present regime with reasonable precautions. However, under the
GST regime, every such works contract is declared to be a service as per schedule II Entry 5(b)
and 5(f) of the draft model law. Therefore splitting of contract into supply of goods and services
at the stage of billing would no more be relevant in case of works contract. However, some tax
planning could still be explored under GST if the contracts itself are split up provided there are
significant tax rate differentials between goods and services.
B. What will be the scope of service under the IGST compared to present service tax Act?
The scope of service covered under the IGST is not replica of present service tax act.
Referring schedule II of the model law, the works contract with material, leasing transaction,
job work transaction etc. are covered under the net of services, therefore the scope of supply
of service in terms of CGST/SGST or IGST is not restricted to the services presently covered
under the service tax Act.
C. whether registered taxable person can opt for composition of tax for making IGST supply
of goods and or service? Whether the registered taxable person can make interstate
inward supply of goods and services after obtaining composition scheme?
Proviso Section 8 of the Model GST law categorically debars to give permission of
composition to the registered taxable person if such person is involved in supplying goods or
services in the interstate trade or commerce which attracts IGST as per model Law. However,
express provision of GST model does not restrict inward supplies liable to IGST. We are
presuming that such restriction may come when the GST Rules are issued likewise several States
VAT Rules.
Q59: With the destination base rule, whether the concept of Interstate works contract would
still continue in the upcoming GST regime?
Section 3 of the IGST Model Law says that if location of supplier and place of supply are
in different states, then the same is required to be treated as an interstate supply. Works
contract activity is deemed to be a service as per Section 3 read with Schedule II Entry 5(b) and
5(f). Hence, goods used during the execution of works contract and transfer of property in goods
by the theory of accretion and accession will have no relevance under the upcoming GST
50
regime. Section 2(65) of the Model GST Law defines provision for location of supplier of service
as under:
Where supply of service is from the place of Location of such place of business
business for which registration is obtained [where
the place of business is defined u/s. 2(75)].
Where a supply of service is from a place other Fixed establishment or location of fixed
than the place of business for which registration is establishment(Where fixed establishment
obtained is defined in Section 2(46))
Where Supply of service is from more than one Location most directly concerned with
establishment whether fixed establishment or the provision of supply
place of business
In absence of place Location of usual place of residence of
supplier.
As per section 6 of the Model IGST law, Place of supply in relation to the construction activity
would be as under:
Services to a registered person location of recipient of service (Section 2(64) define the
location of recipient of service)
Services to an unregistered Location of recipient where the address on record exists
person or
location of supplier of service in other cases
Services in relation to an Location of such immovable property
immovable property
Example :
M/s. XYZ Ltd has provided construction services to M/s. ABC Ltd of Gujarat for construction of
residential complex in the state of Rajasthan. M/s. XYZ is having registered place of business in
the state of Gujarat. Applying the location of supplier and place of supply rule, construction
services provided in relation to immovable property by M/s. XYZ Ltd would be subjected to IGST
as place of supply and location of supplier falls in different States. Therefore, the concept of
interstate works contract may be continued in the upcoming GST era without any clear tax
planning opportunities. However it would be interesting to note that as long as the place of
supply remains in the state of destination, the state may not object. But looking to the
complicated structure of the place of supply rules, if by way of some deeming fiction that is not
the case, we may have some interesting scenarios leading to litigation even under GST.
51
Q60: In the above example if an architect says ABC working on this project from Gujarat has
not made a single visit to Rajasthan to provide his services, then his services would be
subjected to which tax ?
The goods can be easily identified as the same are tangible in nature, therefore as per section
5 of the Model IGST Law, determination of place of supply of goods is relatively simple as
compared to determination of place of supply of service. This is so in view of deeming provision
of Section 6 of Model IGST Law as it is difficult to track the movement of service. GST is a
destination based taxation and therefore services rendered in relation to immovable property
is required to be taxed accordingly. However unless the government comes out with an
exhaustive list of all the services in relation to an immovable property, the issue would remain
debatable. Though to answer the above question, in our opinion IGST is required to be paid on
said supply of service by the architect.
Q61: Interstate works contracts are not subjected to TDS under the respective VAT laws.
Whether the said benefit is expected to be continued in the GST regime ?
The provision to deduct TDS is not applicable to the interstate works contract under the VAT
Act of various states and there are various judgments of various High Courts in this regard.
However, in our view, TDS would be required to be deducted under the GST Regime on the
interstate works contracts subject to recommendation of the Council. However it would be
interesting to note whether the deductor is able to take reasonable care while depositing such
tax in the appropriate account.
Q62: If I am a registered contractor and I receive a contract outside my State for repairs, and
I engage a local contractor in the State in which the immovable property is located then what
will be my place of supply?
As per section 6 of the Draft IGST Law, 2016, the place of supply in case of services rendered
in case of immovable property will be the place of immovable property. In the said case,
irrespective of the fact that you have engaged a local contractor to do the work. When you will
invoice your client then the place of supply will the place of immovable property. Inspite of
hiring a local contractor you also need to take a registration in the State of immovable property.
Q63: If I execute a works contract within my State under the GST regime then what will be
my place of supply for immovable property?
As per Schedule II of the model GST law, 2016 works contract is deemed to be a service
(including transfer of goods). So, as given in section 6 of the IGST law, 2016, the supply of service
in case of immovable property the place of supply should be the location of the immovable
property.
52
Q64: If I am a contractor and I hire estate agent and I am providing service by way of grant of
rights to use of my immovable property which is located outside my State to a person within
the State then what will be the place of supply?
As per section 6 of Draft IGST Law, 2016 ,the place of supply of service shall be the location
at which the immovable property is situated i.e. the location of the immovable property whose
rights are to be given. As per section 6 of the IGST law, 2016, place of supply for the services
provided by architects, interior decorators, surveyors, engineers and other related experts or
estate agents, grant of rights to use immovable property or for carrying out or co-ordination of
construction work shall also be the location of immovable property.
Q65: If I receive a contract for repairs within my State, from another contractor from a
different State then what will be me my place of supply and which GST(CGST/SGST/IGST) I
will charge at the time of invoicing?
As per section 6 of the Draft IGST Law, 2016, the place of supply in case of services rendered
in case of immovable property will be the place of immovable property. In the said case,
irrespective of the fact that you have received assignment from another contractor to do the
work. When you will invoice the other contractor then the place of supply will the place of
immovable property. Inspite of the location of the other contractor being out of your State, you
need to charge CGST and SGST and not IGST, because the place of supply is within your State
only. The availability of input credit with respect to this transaction will depend on the rules of
section 16 of the GST act, 2016.
Q66: If I am contractor based in West Bengal and I receive a contract for repairs of the units
of hotels from XYZ group of hotels which has its head office in Maharashtra and units in
Assam, Jharkhand and Delhi then what will be my place of supply?
As per section 6 of the Draft IGST Law, 2016, when we provide a services in relation of repairs
of an immovable property then the place of supply will be the location of the immovable
property, i.e; the place of units of the hotels. In the given case the place of supply will be
proportionately (on the basis of the value of services rendered as per the terms of contract) the
place of units of the hotels, although the invoice will be raised against the Maharashtra head
office.
Q67: If I am a contractor and I receive a contract for interior designing of an immovable

property located outside the State from a registered dealer within my State then what will be
my place of supply?
In the given case, the place of supply will be the place where the immovable property is
located, i.e.; outside your State, considering the fact that the dealer is located within your State.
Because as per section 6 of the Draft IGST Law, 2016 the place of supply in case of services in
relation to an immovable property, including services provided by architects, interior
53
decorators, surveyors, engineers and the other related experts or estate agents shall be the
location of the immovable property.
Q63: If I am a contractor and I receive a contract for manufacturing and installation of an

elevator outside my State from a dealer situated in my State then what will be my place of
supply if the elevator is constructed within my State?
As per section 5 of the Draft IGST Law, 2016, where the goods are or installed at site, the
place of supply shall be the place of such installation of or assembly. In the given case even if
the buyer is located in your State and even the elevator is manufactured within your State the
place of supply will be the place outside the State where the elevator will be installed.
Q69: If I am a contractor and I receive a contract for construction of stadiums for a national
tournament, the matches of which will be held in different States and the consolidated
consideration for which is receivable form the head office located in Delhi then what will be
my place of supply?
As per section 6 of the Draft IGST Law, 2016, where the event is held in more than one State
and a consolidated amount is charged for supply of services relating to such event, the place of
supply of such services shall be taken as being in the each of the State in proportion to the value
of services so provided in each State as ascertained from the terms of the contract or agreement
entered into in this regard or, in absence of such contract or agreement, on such reasonable
basis as provide in this behalf. In the given case where the matches of the tournament will be
held in different States but the consolidated consideration is to be received from Delhi the place
of supply will be the States in which the matches are going to be held.
54
Chapter :- 8 - Valuation of goods & services
Q70: How value of supply of services shall be determined in case of contractors, sub
contractors and developers?
Looking at the current laws under the service tax, in case of a contractor and sub contractor
gross amount charged from the contractee is considered as the value of the services. Further
all such charges in course of the contract such as labour charges, amounts paid to sub
contractors, charges for planning, designing, architecture fees, cost of consumables, profits, etc.
are required to be included in the gross amount. In case of a developer / builder, all such charges
levied from the buyer / customer of the unit of the complex are to be included in the gross
amount. Amounts pertaining to preferential location charges, ground charges, parking charges,
etc. also form part of the gross amount charged from the customers / buyers. However, the
deduction of land is available either by claiming an actual deduction or by way of a prescribed
abatement rule under the service tax laws.
In case of current VAT laws, value is to be determined as per the procedures and Rules prevailing
in the different States. Different State VAT laws have different schemes to tax the goods
component involved in works contracts. Several states have even come out with separate
schemes for the builders considering the element of land involved in such indivisible contracts
between the builder and the prospective buyer.
Presently as per the Model GST Law, no simplified composition / abatement scheme has been
declared for the construction sector. Further there is lack of clarity on the manner in which
deduction towards value of land would be available while paying GST on the sale of a complex.
As per clause 15(1) of the draft Model GST Law, the value of supply of goods and/or services
shall be the transaction value that is the price actually paid or payable for the said supply of
goods and/or services where the supplier and the recipient of the supply are not related and
the price is the sole consideration for the supply. Further as per Rule 3 of the draft GST Valuation
(determination of the value of supply of goods and services) Rules, 2016, the value of goods
and/or services shall be the transaction value and the transaction value shall be the value
determined in monetary terms.
Clause 15(2) of the draft Model Law suggests inclusion of several amounts in the transaction
value as below :
a. The value of any goods or services incurred by the client or buyer and such value is not
included in the price actually paid i.e. any expenditure in respect to the contract incurred
by the contractee shall be included in the transaction value. For e.g. if the contractor is
55
supposed to procure fuel for the machinery and instead, the said amounts are borne by
the contractee and the contractual price is accordingly reduced, will result in addition of
value of such fuel to arrive at appropriate valuation.
b. The value of goods or services issued free of cost by the client or the buyer i.e. free issue
of material and services. For e.g. the contractee chooses to issue steel and cement to the
contractor as free issue material and the contractor prepares his quote accordingly by
reducing the value of such goods. Now at the stage of billing, he would be required to add
value of such materials while charging GST. Not only that even the contractee when he
supplies such materials to the contractor may get covered within the ambit of GST as a
transaction without consideration.
c. Any royalties and license fees related to the supply to be paid by the client or the buyer.
For e.g. if royalty is payable on some site materials like sand, aggregate and the contractee
undertakes to pay the same, the same would have to be added by the contractor while
charging GST.
d. Any taxes, duties, fees and charges levied under any statute other than CGST / SGST / IGST
Acts.
e. Incidental Expenses, such as, commission charged by the supplier.
f. Subsidies provided, linked to the supply i.e. in case of infrastructure projects where the
Government has approved subsidy for a project, it shall also form a part of transaction
value.
g. Any reimbursable expenditure or cost incurred by or on behalf of the supplier by the client
or buyer.
h. Any discount or incentive that may be allowed after the supply has been effected.
Hence, in case of contractors & subcontractors, the amount to be charged to the client shall
be the transaction value and in case of real estate developers the value shall be the price of unit
charged to the buyer subject to inclusion of other expenditure and values as listed above.
Example: Mr. A has undertaken a construction project and has provided the following
services:
Amount (in Value to be added in the

Particulars
Rs.) Transaction Value (in Rs.)
Construction Cost Charged 20,00,000 20,00,000
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Add :
Value of Scaffolding materials paid by the

50,000 Already included
contractor
Value of Steel & Cement paid by the contractee &

10,00,000 10,00,000
issued to Mr. A for executing the work
Commission charged on the materials provided by

1,00,000 1,00,000
Mr. A to contractee
Local taxes paid by Mr. A for the project 10,000 10,000
Total Transaction Value for GST 31,10,000
Hence the transaction value for Mr. A of the above construction project shall be Rs. 31,60,000.
Value to be
Amount (in added in the
Particulars
Rs.) Transaction
Value (in Rs.)
Value of Running account bill to be raised by
2,00,00,000 2,00,00,000
Mr. A
Add :
Already included
Value paid to the labours by Mr. B 5,00,000
Government Subsidies on constructing the
bridge by allowing purchase of material at 50% 1,00,00,000 1,00,00,000
price
Amount of services like crane rental, manpower
supplied free of cost by the contractee 10,00,000 10,00,000
Total Transaction Value for GST 3,10,00,000
Hence the transaction value for Mr. A of the above construction project shall be Rs. 3,15,00,000.
Example: Mr. C, a builder has charged from the buyer of a unit in a complex the following:
Amount (in Rs.)

Particulars
Value of Land 50,00,000
Construction Charges 12,00,000
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Club House Charges 10,00,000

Ground Level Charges 1,00,000
Other Charges 50,000
Total Transaction Value 73,50,000
Hence the transaction value for Mr. C of the above project taxable under GST assuming
government would make suitable rules to exclude the value of land shall be Rs. 23,50,000.
Q71: Whether GST shall be applicable on the one time maintenance charges, stamp duty
charges, and other expenditures being collected by the builders or developers?
In addition to the
cost structure of the complexes, the builder would also be collecting OneTime Maintenance
Charges, stamp duty and other charges from the unit owner which would be deposited in a
bank as fixed deposit and the interest accruing thereon would be used to discharge the
commercial taxes on the property, water, electricity, security and club charges, etc. and other
common maintenance charges of the complex. The fixed deposit then would be transferred to
the society once it is formed.
The levy of taxes on one time maintenance deposit has always been in dispute under the
current tax structure. In case of Kumar Beheray Rathi vs. C.C.Ex, Pune reported at 2014 (34)
S.T.R. 139 (Tri. Mumbai) where it was held that the Assessee acts only as a trustee or pure
agent upon formation of cooperative society when the deposit account is shifted to Flat
Owners Co operative Society. Therefore, assessee is not a provider of Maintenance and Repair
service to flat buyers. Hence the tribunal has set aside the revenues contention for levy of
service tax on these maintenance charges being collected by the builders and then
subsequently transferred to the society. The material fact under the current tax laws is that the
builders or the developers must be acting as pure agent under all the cases. It is pertinent to
note that in case of agreement among the buyers, such amount should be specifically displayed
in the agreement and such amount should be transferred to the society as and when the same
is formed.
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Accordingly under the Draft GST Model Law, the concept of pure agent is defined under the
draft GST Valuation (Determination of the Value of Supply of Goods and Services) Rules, 2016.
As per Rule 8(1) Pure Agent,
pure agent means a person who
a. enters into a contractual agreement with the recipient of service to act as his pure agent to incur
expenditure or costs in the course of providing taxable service;
b. neither intends to hold nor holds any title to the goods and/or services so procured or provided
as pure agent of the recipient of service;
c. does not use such goods and/or services so procured; and
d. receives only the actual amount incurred to procure such goods and/or services.
Conditions for deducting such values from the transaction value, specified in the Rule are
stated as below:
a. the service provider acts as a pure agent of the recipient of service when he makes payment to
third party for the goods and/or services procured;
b. the recipient of service receives and uses the goods and/or services so procured by the service
provider in his capacity as pure agent of the recipient of service;
c. the recipient of service is liable to make payment to the third party;
d. the recipient of service authorizes the service provider to make payment on his behalf;
e. the recipient of service knows that the goods and/or services for which payment has been made
by the service provider shall be provided by the third party;
f. the payment made by the service provider on behalf of the recipient of service has been
separately indicated in the invoice issued by the service provider to the recipient of
service;
vii. the service provider recovers from the recipient of service only such amount as has been paid
by him to the third party; and
viii. the goods and/or services procured by the service provider from the third party as a pure agent
of the recipient of service are in addition to the services he provides on his own account.
Hence, in case of a builder where one time maintenance charges are being collected by
the builder, they shall not form part of the charges provided such charges are separately
charged from the buyers of the units and subsequently transferred to the society. This
may be sufficient for claiming exclusion from GST.
Example: Mr. A has entered into an agreement with the Builder to buy a unit in a complex. The
agreement shows the following charges charged by the Builder,
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Transaction
Charges Shown in Agreement Amount Value for
GST
Sale of unit including land and
37,00,000 37,00,000
Construction cost
Club House Charges 1,00,000 1,00,000
Ground Level Charges 50,000 50,000
One time Maintenance Deposit 1,20,000
Stamp Duty Value (actual) 1,85,000
In this case the agreement should specifically mention about the charges levied from the
customers on an actual basis acting as a pure agent, hence such charges shall not be subject to
GST.
Example: Mr. A has entered into an agreement with the Builder to buy a unit in a complex.
Where the builder has charged an amount of Rs. 50,00,000 for a unit including the maintenance
charges for a life time, stamp duty and other charges. In this case the GST shall be levied on the
total amount charged of the unit as the agreement does not specify the amount charged as a
pure agent from the buyer of the unit.
Q72: I have collected the preferential location or the parking allotment charges from the
buyer. Whether such charges shall be subject to GST?
PLC is a premium cost which a home buyer pays while preferring to book a unit with a better
location situated in the same apartment complex. An apartment facing a sea, swimming pool,
lake or a park, or Vastu compliant home will be charged a PLC at per sq. ft. rate. PLC is charged
on a per sq ft basis, on the super builtup area of the apartment. PLC also changes depending
on the quality of construction, the floor on which the unit is located, and the location of the
unit. Each developer and project has a different PLC amount and most of the luxury apartments
located have higher PLC based on each unit.
Under the current service tax laws, all such charges charged by the builder to the buyer for the
preferential location charges shall be included in the valuation of service and service tax is liable
to be paid on such services.
As per the present GST draft Model Law, clause 15 (1), the value of supply of goods or services
shall be the transaction value, that is the price actually paid or payable for the said supply of
goods or services. Hence the PLC charges being collected by the builder and developers shall be
subject to GST.
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Q73: Whether GST shall be applicable on the free of cost units allotted to the land owner by
the developer in form of consideration payable towards land development rights? If yes, what
shall be the value to be considered?
In case of a land development agreement entered by the land owner and the builder /
developer, where some extra units are constructed, of which some of the units are sold by the
developer and some are transferred to the land owner in lieu of land consideration. Under such
arrangements, there is a question whether tax shall be levied on such transfers as the same is
in lieu of the land and immovable property. In such cases although the consideration is against
the land being transferred, however, there is an element of service involved in such
agreements, where the builder, indirectly provides the construction service on such units being
transferred to the land owner. Hence considering the same, under the current tax structure,
service tax and VAT both are levied on such transfer of units by builder to land owner.
Taking the same view under the GST Law, GST shall also be leviable on free units transferred by
the builder / developer to the land owner. The second issue under such agreement comes for
the valuation of such units. Under the current service tax laws, the value of such taxable services
shall be equivalent to the gross amount charged by the service provider to provide similar
service to any other person. Hence the value shall be the consideration charged by the builders
to the other buyers of the units and such consideration shall be the value of services for the
units free allotted to the land owner.
Under the draft Model GST Law as per the GST Valuation (Determination of the Value of Supply
of Goods and Services) Rules, 2016, Rule 4 for Determination of value of supply by comparison,
the value shall be determined on the basis of the transaction value of goods or services of like
kind and quality supplied at or about the same time to other customers. Further the proper
officer may make adjustment on account of following relevant factors,
a. difference in the dates of supply,
b. difference in commercial levels and quantity levels,
c. difference in composition, quality and design between the goods and/or services being
valued and the goods and/or services with which they are compared,
d. difference in freight and insurance charges depending on the place of supply.
Hence, under GST valuation of the units allotted to the land owner shall be considered as the
same amounts being charged from the other buyers.
Example: Mr. A has entered into an agreement to construct a complex comprises of 30 units
of which 10 units (5 Units on Top Floor and 5 Units on second floor) are to be allotted to land
owner Mr. B towards the development rights. Following details are available,
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Charges for the Top Floor Charges for the Second Floor
Transaction Transaction
Amount Amount
Value for GST Value for GST
Charges collected from the Buyers Charged Charged
for the units for the units
by Mr. A from Other from Other
allotted to allotted to Land
Buyers Buyers
Land Owner Owner
(Per Sq Ft) (Per Sq Ft)
(Per Sq Ft) (Per Sq Ft)
Sale of unit including land and
1,850 1,850 1,850 1,850
Construction cost
Club House Charges 50 50 50 50
One time Maintenance Deposit 60 60 60 60
Stamp Duty Value 93 93 93 93
Preferential Location Charges 100 100
Total Value 2,153 2,153 2,053 2,053
The above value may be subject to reduction of One Time maintenance deposit and stamp duty
value before arriving at taxable value subject to prescribed conditions.
Q74: My contractor has issued some materials where he has only charged the cost of such
materials and separately specified in the bills and invoices. Whether GST may be levied in
such cases?
There are cases where a contractor / subcontractor procures some materials as instructed
by the main contractor or the contractee. In such cases only the cost of material being procured
by the contractor / subcontractor is charged to the contractee/contractor. Under such an
incident, the contractor or the subcontractor as the case may be acts as a pure agent to the
main contractor or the contractee.
Hence, all the provisions as discussed in the question supra shall be applicable to the sub
contractor or the contractor. Thus, once it is proved that the principles of the pure agent are
applicable, GST shall not be levied in such cases.
Q75: I provide construction services to a land owner who in return (after completion) leases
the land and building to me for a period of 5 years. Can I adjust the payment of the
construction services with the lease payment? When do I have to account for GST?
First we need to note that there are 2 supplies involved; the supply of construction services
from the contractor to the land owner and the second supply made by the land owner to the
contractor i.e. leasing services. You have to account GST on the open market value of the 5
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years lease of the land and building. The time to account GST is when the lease is given to you.
The land owner has to account for the open market value of the construction services. Both the
land owner (if taxable person) and contractor should issue a tax invoice for the gross value of
the supply made to each other and account the GST accordingly. It is incorrect to adjust the
payment of the construction with the lease payment. The contractor as GST registrant has to
charge land owner GST for the supply of construction services. The landowner may not be able
to claim the Input Tax credit due to specific restriction in place under the act. The landowner
will also have to charge GST for the leasing services and the contractor may recover it as his
input tax against any other output tax liability for the services rendered using that premises.
GST has to be accounted based on the provision related to time of supply of continuous services
as mentioned earlier based on the terms of agreement in place.
Q76: I provide construction services to a landowner who in return gives to me units of the
commercial building after the construction is complete. How and when do the land owner
and I have to account for GST?
You have to account for GST on the open market value of the 20 units of commercial building.
The landowner (if GST registered) would account for GST on the open market value of the
construction services provided by you as he is deemed to have received the consideration in
the form of your services prior to receipt of the Building Completion certificate. You as well as
the landowner will have to account for GST based on the provision related to time of supply of
continuous services as mentioned earlier based on the terms of agreement in place.
Q69: Whether GST shall be applicable on the right to use the capital goods given by the
contractee to the contractor free of cost to be used in execution of work?
Under the draft model GST Law, clause 15(2)(b), the value, apportioned as appropriate,
of such goods and/or services as are supplied directly or indirectly by the recipient of the supply
free of charge or at reduced cost for use in connection with the supply of goods or services shall
be included, to the extent that such value has not been included in the price actually paid.
Further the contractee may also be subjected to GST on the deemed consideration of the
transfer of right to use of the capital goods.
Q77: I am unable to bifurcate the value of land & construction charges charged from the
buyers of the units. Whether any abatement is available in such case?
Presently there is no such provision in the Model GST Law. However once the law and rules
are finalized, we may have necessary framework for such exclusion and taxing the land
component has never been the intention of the government considering that the stamp duty
levy is being continued.
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Q78: Whether subcontractors deduction is available to the main contractor under GST?
It is very common in works contracts for the main contractor who got the work awarded
in his name to offload the same to subcontractors. The subcontractor procures the materials
and services, installs the materials as per the contractual terms & conditions and transfers the
property in the materials. Under the current VAT regime where the value of subcontractor is
available as a deduction from the turnover of the contractor as transfer of property by accession
can take place only once, i.e. from subcontractor to the client. However one needs to carefully
study the GST Model Law to arrive at any conclusion. The primary view is that such value based
deductions would no more be available in GST Regime, however time will tell how the scope of
supply, especially when it includes a sale would be interpreted by the experts and the judiciary.
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Chapter :- 9 - Input Tax Credit under GST
Q79: Whether the input tax paid on the IGST, CGST and SGST can be set off against each other?
As per section 35(5) of the Draft Model GST Law,
a. The amount of input tax credit on account of IGST available in the electronic credit ledger
shall first be utilized towards payment of IGST and the amount remaining, if any, may be
utilized towards the payment of CGST and SGST, in that order.
b. The amount of input tax credit on account of CGST available in the electronic credit ledger
shall first be utilized towards payment of CGST and the amount remaining, if any, may be
utilized towards the payment of IGST.
c. The input tax credit on account of CGST shall not be utilized towards payment of SGST
and the input tax credit on account of SGST shall not be utilized towards payment of CGST.
Thus, a contractor / subcontractor or the builder / developer can avail and utilize the input
credit paid on CGST, SGST and IGST in the following order :
Input of Set off Against Conditions

IGST 1st Preference
IGST
CGST 2nd Preference
(Inter State Supply)
SGST 2nd Preference
CGST CGST 1st Preference Set off against SGST liability
(Central GST) IGST 2nd Preference shall not be allowed
SGST SGST 1st Preference Set off against CGST liability
(State GST) IGST 2nd Preference shall not be allowed
It can be noted that the cross utilization of credit between CGST and SGST is not allowed.
Example: Mr. A, a contractor, has the following liability and input at the end of the month,
Input Net
GST GST Input Balance Cross
Case I Credit Input
Payable Input Set off Payable Set off
Balance Balance
IGST 1,00,000 2,00,000 1,00,000 1,00,000 (80,000) 20,000
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CGST 2,00,000 1,50,000 1,50,000 50,000 50,000

SGST 4,00,000 3,70,000 3,70,000 30,000 30,000
Input Net Input

GST GST Input Set Balance Cross Set Net
Case II Credit Balance
Payable Input off Payable off Payable
Balance C/F
IGST 2,00,000 1,00,000 (1,00,000) 1,00,000 1,00,000
CGST 1,00,000 3,00,000 (1,00,000) 2,00,000 (1,00,000) 1,00,000
SGST 4,00,000 3,70,000 (3,70,000) 30,000 30,000
Q80: Whether the input shall be reversed in case of common inputs attributable to taxable
as well as nontaxable supplies?
As per Section 16(6) of the CGST Act, credit attributable to the non taxable supplies are
required to be reversed.
For example, if inputs are used for sold and unsold residential units, the credits used
proportionately in the unsold portion should be reversed. The mechanism to arrive at the
reversible amount is expected to be provided in the Rules.
Q81: Whether input of Basic Customs Duty & IGST paid on imported goods shall be
available?
Basic customs duty paid on imported goods will not be available as credit. IGST paid on the
eligible inputs and capital goods on import will be available as credit. IGST paid on import of
service under reverse charge would be available as credit.
Q82: Can I claim input tax for the services related to the supply of construction projects? For
example, professional services of architects?
Yes. Input credit on eligible services supplied by others for use in construction activities
would be available as credit. As of now, there is no provision for the payment of GST only on
certain portion. Works contract has been treated as service and hence entire amount would be
liable for GST as supply of service. Therefore most of the input services used in the construction
activities would be an eligible supply of service and hence credit would be available.
If the principal avails the credit in respect of architect fee for the construction of factory or office
building, as per Section 9(d) of the Act, credit will be available as the restriction is towards
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following procurements : (c) goods and/or services acquired by the principal in the execution
of works contract
when such contract results in construction of immovable property, other than plant and
machinery;
d. goods acquired by a principal, the property in which is not transferred (whether as goods
or in some other form) to any other person, which are used in the construction of
immovable property, other than plant and machinery;
Since the architect fee independently does not result into construction of immovable
property it does not get covered by the exclusion offered under Clause (c) and since clause
(d) only speaks of restricting the credit on goods and not services, it wont get covered
under Clause (d) either.
Q76: Will my client be able to claim the Input Tax credit charged by me on the construction
projects ?
If your client is involved in the construction activity, he will be eligible to avail the credit.
If your client is an end user like factory, as per the provisions of Section 16(9)(c), credit will not
be available.
The above provision is similar to the current restrictions in VAT and Service Tax Laws which deny
credit to the ultimate client.
Q83: What is the definition of a principal ? Will this definition cover the real estate developer,
a main contractor subletting the works to subcontractors or only the ultimate client?
The word principal and agent is defined in Section 2(77) and Section 2(5) of the Model GST
Law respectively, which is as under:
Agent:
(5) agent means a person who carries on the business of supply or receipt of goods and/or
services on behalf of another, whether disclosed or not and includes a factor, broker,
commission agent, arhatia, del credere agent, intermediary or an auctioneer or any other
mercantile agent, by whatever name called, and whether of the same description as
hereinbefore mentioned or not
Principal:
(77) principal means a person on whose behalf an agent carries on the business of supply or
receipt of goods and/or services
From the above definitions it is not very clear whether these definitions are really meant for
Section 16 as they do not properly fit within the provisions. Thus here we believe that the final
law needs to properly clarify the meaning of the word principal in context of this section as
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for every subcontractor, even his contractor can be considered as the principal. If that may be
the case he would be denied the input tax credit on such supplies making the implications of
this provision severely detrimental to his interests.
Q84: Whether the input credit can be available on interstate supplies?
Every interstate supplies will be liable to IGST. Credit of IGST will be available if the same
is used by the contractor. However, if the same is purchased by the end user and the same is
not part of the contractual agreement with the contractor, then as per the provisions of Section
16(9)(d) of the CGST Act, credit will not be available.
For example, if A has given a contract to construct factory to B wherein A will provide steel free
of cost to B, if contractual value of B does not include value of steel, then A cannot take the
credit of IGST paid on the interstate purchase of steel. However, if valuation rule is to be
applied and value of steel should be included in the value of B, then A can avail the credit of
IGST and charge CGST and SGST considering the movement from A to B as a supply deemed to
be taxable even though without a consideration. However, ultimately, the total amount of GST
to be charged by B will not be available to A due to specific exclusions under Section 16(9).
Q85: Whether the input credit can be available on Composition Levy?
As per Section 16(9)(e) of the Draft Model Law, any GST paid under the composition scheme
by the supplier is not available as credit to the buyer.
A composition dealer will have to raise bill of sale, however he cannot collect any tax as per
specific restriction u/s 8(2). Based on this, one would come to know that the supply of works
contract service provider is under composition scheme.
Q86: Is there any time limit to avail the input credit?
As per Section 16(15) of the Draft Model Law, credit should be availed before filing the return
for the month of September following the end of financial year or filing of the relevant annual
return, whichever is earlier.
For example: For the supplies received in the year 201718, the last date to claim the credits
would be on or before filing the return for the month of September 2018 or filing the annual
return, whichever is earlier.
Further, as per the provisions of Section 15(3A) of the Act, if a person has taken the voluntary
registration, he can avail the credit within a period of one year from the date of issue of tax
invoice relating to such supply. In other words, if such supplier possesses the stock of more than
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one year old, he will not be able to avail the credit for a period exceeding one year from the
date prior to the registration.
Q87: Whether the input credit will be available on free supply material to the supplier?
If the contract states that value of free supply material is also part of the contract, then such
supplies would be a supply in the hands of the main contractor (supplier) or principal (recipient)
and hence principal or main contractor would be liable for GST. This is clearly provided in
Section 15(2)(a) of the Act.
If value of such supplies provided by the recipient (principal) have to be added or included in
the value of supply of the supplier (contractor), then the recipient (principal) can avail the credit
and raise invoice for such free supply and charge GST. Based on the invoice of principal, supplier
(contractor) can avail the credit.
For example, if principal purchases steel and provides at free of cost to the contractor, principal
can avail the credit and raise invoice on contractor and charge GST. The contractor can avail the
credit and include the value of such free supplies and charge GST on the full value.
Q88: Whether input credit will be available to the receiver (principal) on free supply material?
As stated in the previous question, if receiver (principal) is liable for GST on the free
supply
material, he has to raise tax invoice on the supplier (contractor). If invoice is not raised, then
the supplier (contractor) will any way be liable for GST on such free supply and unnecessarily
the cost of supply will be increased. That is why, the receiver (principal) has to raise invoice and
based on such invoice, as per the provisions of Section 16, the supplier (sub contractor or main
contractor wherein main contractor or principal respectively would have supplied material at
free of cost) will be eligible to avail the credit.
Note: It is not advisable to have such concept in case the principal is not a registered person
like construction of individual house. In such case, the entire contract is to be undertaken by
the contractor himself to avoid the double taxation on the very same amount without the
benefit of input credit.
Kindly note that there is no requirement to make payment to the supplier to avail the credit.
Q89: What is the meaning of capital goods for a developer or builder or contractor?
Capital goods is defined in Section 2(20) of the CGST Draft Model Law, which is as under:
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(20) capital goods means:
(A) the following goods, namely:
(i) all goods falling within Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading
6805, grinding wheels and the like, and parts thereof falling under heading 6804 of
the Schedule to this Act;
(ii) pollution control equipment;
(iii) components, spares and accessories of the goods specified at (i) and (ii);
(iv) moulds and dies, jigs and fixtures;
(v) refractories and refractory materials;
(vi) tubes and pipes and fittings thereof;
(vii) storage tank; and
(viii) motor vehicles other than those falling under tariff headings 8702, 8703, 8704,
8711 and their chassis but including dumpers and tippers used
(1) at the place of business for supply of goods; or
(2) outside the place of business for generation of electricity for captive use at
the place of business; or
(3) for supply of services,
(B) motor vehicle designed for transportation of goods including their chassis
registered in the name of the supplier of service, when used for
(i) supplying the service of renting of such motor vehicle; or
(ii) transportation of inputs and capital goods used for supply of service; or
(iii) supply of courier agency service;
(C) motor vehicle designed to carry passengers including their chassis, registered in the
name of the supplier of service, when used for supplying the service of
(i) transportation of passengers; or
(ii) renting of such motor vehicle; or
(iii) imparting motor driving skills;
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(D) Components, spares and accessories of motor vehicles which are capital goods for
the taxable person.
As the major capital goods like excavator, transit mixer, concrete pump, batching plant etc.,
may fall under chapter 84, the credit may be available. If the same falls under Chapter 87, credit
will be available if such goods are registered in the name of the contractor.
Q90: Whether credit would be available on capital goods even if the property thereon is not
transferred?
If any eligible capital goods are obtained on hire or lease and supplier has charged GST, then
the receiver can avail the credit. There is no requirement under the law that the capital goods
should be owned by the receiver.
Q91: Whether credit will be available on lorry or other transport vehicles used in the site?
As per the definition of capital goods, if transportation vehicle is registered in the name
of the supplier of service and used for the transportation of goods at the site, the credit can be
availed. Kindly note that in this case, the vehicle should be registered in the name of the service
provider.
If the transportation vehicle is obtained on hire for transporting the goods, credit would be
available based on the invoice issued by the supplier.
Q92: Whether credit is to be reversed when the capital goods are transferred from one project
site to another project site when both the sites are in different states?
As per Section 19(1) read with Schedule III to the CGST Draft Model Law, every supplier shall
be liable to be registered under CGST Draft Model Law in the State from where he makes a
taxable supply of goods.
As per the scope of supply, any supply of goods and or services by a taxable person to another
taxable person or no taxable person in the course or furtherance of business without
consideration would be held as supply.
Reading of the above makes it clear that if a contractor or builder or developer operates in more
than one State, he has to register in all those states.
Example : When the contractor shifts concrete mixer from one project in the state of MH to
another project in Rajasthan, he has to raise invoice and charge IGST on the appropriate value.
Therefore, when the capital goods or any material is transferred from one state to another
state, it would be held as supply and IGST is payable. Since tax would be payable, credit need
not be reversed.
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Q93: When IGST is payable in respect of transfer of capital goods from one site to another
site located in different state, what is the basis of reversal of the credit?
In case of supply of capital goods, GST or IGST shall be payable on amount equal to the input
tax credit taken on the said capital goods reduced by the percentage points as may be specified
in this behalf or the tax on the transaction value, whichever is higher.
For example, if capital goods are sold or transferred after using say 2 years, then the
Government may provide that credit taken should be reduced by 20% and 80% of the credit
availed should be paid back on the supply or the actual tax on the transaction value, whichever
is higher. In clear terms, if the value of machine (concrete mixer) was Rs.1,00,000 and after two
years, as per the depreciation norms of the GST Draft Model Law, it would be Rs.80,000. Hence
IGST may have to be charged on Rs.80,000. If the transfer value is more than Rs.80,000, say
Rs.1,20,000, then IGST has to be charged on Rs.1,20,000.
Q94: Whether input credit is to be paid back when material is stock transferred from one
state to another state?
Similar to capital goods, when input is stock transferred from one State to another State,
the tax should be charged on the transaction value. Presently, no rule has been framed to
determine the value. However, it will not be less than the value of procurement.
For example, if material worth Rs.1,00,000 is transferred from one State to another, IGST is
payable on such transfer value. Hence there is no concept called reversal of the credit. Stock
transfer would be considered as a taxable supply and hence there is no requirement to reverse
the credit.
If the project in other State is exempt like construction of individual house (as of now, no
exemption is given and we are only assuming a hypothetical case) then the credit in other State
will not be available.
Q95: Whether input tax availed should be paid back when material is returned to the
supplier?
There is no concept of purchase return or sales return. When purchased goods are to be
returned, it will be considered as supply and it will be liable for GST or IGST as the case may be.
Here again there is no clarity about the value. In this regard, a reference may be made to
Explanation to Section 25(1) of the CGST Act which clarifies that return of supplies may be
treated as an outward supplies.
It is not clear when the goods are returned by any unregistered person, how to treat the same.
Further it is not clear what would have to be done In case of cancellation of the apartments by
the buyers.
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Q96: Whether input credits should be reversed in case of unsold residential or commercial
properties?
When input is used for the construction of unsold residential or commercial properties, it
would be held as nontaxable transaction or exempted transaction. Further, as per Section
2(57), input tax means tax paid or charged on supply of goods or services used or intended to
be used by the buyer in the course of furtherance of business. In case of inputs used for the
construction of unsold properties, as per the provisions of Section 16(5) and 16(6), the
attributed credit should be reversed or paid back.
Q97: Whether capital goods credit should be reversed in case of unsold residential or
commercial properties?
As such the provision is not clear. As per the provisions of Section 2(20), as long as the capital
goods are used at the place of business for supply of goods, it would be treated as capital goods
and hence credit would be available. As per the present Cenvat Credit Rules, if capital goods are
partly used in the manufacture of dutiable goods and partly in the manufacture of exempted
goods, full credit would be available. From the provisions of Section 2(20) read with Section 16,
it indicates that if capital goods are partly used for supply of taxable goods and partly for
exempted goods, unlike on inputs, credit need not be attributed. However the matter needs
proper clarification from the government in the final law.
Q98: Whether input credit would be available in case of ongoing projects?
This being a transitional issue, has been addressed separately. However, credit would be
available subject to fulfillment of various conditions.
Q99: Whether input credits would be available in case of construction of model apartments?
As per the definition of input tax under Section 2(57), it is the tax charged by the supplier
for the supply of goods which will be used or intended to be used in the furtherance or in the
course of business. The meaning of input tax is very wide. Though there are restrictions in
availing the credit under Section 16, in our view, credit on inputs used for the construction of
model flat should be fully available.
Q100: In case of Joint development, whether full credits would be available in case of
construction of share of land owner free of cost?
The meaning and scope of supply under Section 3 includes barter. Therefore first and
foremost, construction for the land owner without actual money would be held as supply. Since
it would be held as supply, the same would be liable to GST. Once GST is payable under Section
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7 of the Act, there is no requirement to reverse the input credits used in the construction of
land owner portion.
Q101: In case of sales return to an individual customer, whether credit has to be reversed?
Explanation to Section 25 has envisaged sales return as only from registered persons. It has
not envisaged the return of goods from unregistered persons. As such there is no clarity in the
law about the treatment of sales return by an unregistered person. Hence we await necessary
clarity from the final act and rules.
Q102: Whether credits would be available in case of inputs used for construction of site office
or marketing office?
site office or marketing office would be fully available. In our view, it will not fall under the
restriction clauses given in Section 16 such as goods and / or services used for private or
personal consumption or goods acquired by the principal, the property in which is not
transferred (whether as goods or in some other form) to any other person which are used in
the construction of immovable property, other than plant and machinery.
Q103: Whether credits would be available in case of materials used for the construction of
temporary shelters to the workers and also toilets in the work site?
temporary shelters to the workers as well as toilets in the work site would be fully available. In
our view, it will not fall under the restriction clauses given in Section 16 such as goods and or
services used for private or personal consumption or goods acquired by the principal, the
property in which is not transferred (whether as goods or in some other form) to any other
person which are used in the construction of immovable property, other than plant and
machinery.
Q104: If tax is not shown in the purchase bill (inclusive of tax), whether credit would be
available on inclusive basis?
No provision has been made about the contents of the invoice. The Rules as and when
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they are finalized shall provide for the contents of the invoice. As the requirement of tax is
backbone to avail the credit, in our view, credit may not be available in a case invoice is issued
on inclusive of tax basis.
Q105: Whether credits would be available in case of purchase from URDs?
The definition of input tax under Section 2(57) includes tax payable under Sub section (3)
of Section 7. Under Section 7(3), tax is payable under reverse charge basis. Therefore if
Government notifies that receiver of the goods has to pay the tax under Section 7(3) to pay GST
on purchase of goods from URD, credit would be available on such taxes paid. However, clear
provision has not been made in Section 16 of the Act.
Q106: When the material is given to a contract labourer for job work, whether credit is to be
reversed?
As per Schedule 1 to Section 3 of the Draft Model Law, any supply of goods to a job worker
would be treated as supply. However, Schedule 1 excludes supply of goods by a registered
taxable person to job worker from the purview of supply provided procedures given in Section
43 is followed.
As per the provisions of Section 43, a special permission from the commissioner has to be
obtained to send the material to a job worker for job work.
Job work is defined in Section 2(62) which is as under:
job work means undertaking any treatment or process by a person on goods belonging to
another registered taxable person and the expression job worker shall be construed
accordingly.
Therefore if special permission is obtained from the Commissioner, goods can be sent to job
worker without paying the GST. However, if the permission is not obtained, then such
movement would be held as supply and tax would have to be charged.
Q107: When material is sent out of the state for job work or repair, whether credit is to be
reversed?
As per Schedule 1 to Section 3 of the Draft Model Law, any supply of goods to a job worker
would be treated as supply. However, Schedule 1 excludes supply of goods by a registered
taxable person to job worker from the purview of supply provided procedures given in Section
43 is followed.
As per the provisions of Section 43, a special permission from the commissioner has to be
obtained to send the material to a job worker for job work.
Job work is defined in Section 2(62) which is as under:
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job work means undertaking any treatment or process by a person on goods belonging to
another registered taxable person and the expression job worker shall be construed
accordingly.
Therefore if special permission is obtained from the Commissioner, goods can be sent to job
worker without paying the GST. However if the permission is not obtained, then such
movement would be held as supply and tax would have to be charged.
At the moment, it is not clear whether repair falls under the purview of job work. As the
definition uses the word treatment and if the repair involves some treatment, then repair will
fall within the meaning of job work. Otherwise IGST may have to be charged on such supply.
Q108: Whether credit would be available when supply, erection and commissioning of plant
is involved?
As per Section 16(9)(c ), credit will be available to the principal when works contract results
into installation of plant and machinery.
For example, if the works contract is to erect a furnace in a factory which requires construction
of wall, floor and other structures, the credit thereon would be available.
Q109: Whether credit would be available for the repair or maintenance of factory building?
If the works contract results into repair of a factory building and which becomes part of
immovable property, credit may not be available.
For example, if the works contract is for the reconstruction of a factory wall or compound,
credit thereon would not be available.
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Chapter :- 10 - Invoicing, Payments & Debit Notes
Q110: Within how many days the invoice is required to be issued to the recipient of supply in
construction contracts?
As far as the Model GST Law is concerned, no time frame is provided for issuance of invoice.
The same may be provided by way of rule mechanism in the time to come.
However, currently under the Service tax Law (governed by Finance Act, 1994), the time limit
of 30 days has been provided for raising the invoice from the date of completion of an event .
Q111: While raising a tax invoice, which all details are required to be included by the builder
or the contractor?
As per Clause 23 & 23A of the Model GST Law mention of following details are mandatory
in the tax invoice for a contractor / builder / developer
Description of service supplied.
Value of service supplied.
Tax (GST) charged on such service supplied.
Other such particulars as may be prescribed.
The additional details that may be prescribed by rule mechanism may include, but not limited
to, following which may be incorporated by the builder or the contractor in the invoice or the
bill
Invoice No and Date

Name, Address and GSTIN of supplier of service
Name, Address and GSTIN of receiver of service
Place of supply of service
Work order or the reference number
Amount of billing of the previous RA bill
Amount of other taxes charged
Signature
Q112: If I have opted for the composition scheme, whether I can raise the Tax Invoice?
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Under the current service tax laws, no composition scheme is notified and available for the
small service providers. In present VAT Laws of different States, composition schemes are
notified by the respective State Governments for small service providers. States such as Delhi,
Assam, Gujarat, etc. have specifically put up a restriction to collect the tax and issue the tax
invoice.
As per Clause 8 of the Draft Model GST Law, a composition scheme can only be opted for by
taxable person having all India Turnover of less than Rs. 50 Lakhs. If contractor or the builders
have the turnover below the stated limit and have opted for composition scheme than as per
proviso to Section 23(ii) of the Draft Model GST Law, the contractor or the builder cannot issue
Tax Invoice but will have to issue Bill without charging GST therein.
Q113: If I have opted for the composition scheme whether I can collect the tax from the
recipient of supply?
No, as per Clause 8 of the Model GST Law, a taxable person opting for composition scheme
cannot collect tax from recipient of supply but shall pay the same from their own pocket. Hence,
a contractor or the developer / builder who has opted for the composition scheme will have to
bear the cost of such taxes.
Q114: What would be the case if I have already issued a Tax Invoice and later on the amount
of invoice is negotiated by the client as a very usual practice in the construction sector?
Whether there is any time limit to adjust the excess or short amount of Tax invoice?
In present service tax laws, the provisions for the revision of the invoice are not incorporated,
however, the adjustment of excess tax are provided in the Service Tax Rules. Under VAT laws,
provision for the invoices and revision are different according to the different States.
Clause 24 of current Draft Model GST Law deals with renegotiated value of supply. According
to said clause, where a Tax Invoice has been issued for supply, the supplier may issue
Credit Note Debit Note

If taxable value or tax as per Tax Invoice is If taxable value or tax as per Tax Invoice is
found to be in excess found to be in less
To contain such particulars as may be To contain such particulars as may be
prescribed (by way of rules) prescribed (by way of rules)
On or before 30th September from the On or before 30th September from the end
end of financial year to which such supply of financial year to which such supply
relates OR before filing of annual return relates OR before filing of annual return for
for such relevant year, whichever is earlier such relevant year, whichever is earlier
Can only be issued if excess tax collected
under Tax Invoice has been refunded
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Scenario 1 Issue of Credit Note in case if the tax charged is less than the actual bill certified.
Supply of Construction Services

Contractor Client
Tax Invoice Issued
Taxable Value < Actual Taxable Value

Certified
Contractor Client
Issue Credit Note, earliest of, on
or before 30th Sep or the date of
filing of Annual return
Scenario 2 Issue of Debit Note in case if the tax charged is charged in excess than the actual
bill certified.
Supply of Construction Services

Contractor Client
Tax Invoice Issued
Taxable Value > Actual Taxable Value

Certified
Contractor Client
Issue Debit Note, earliest of, on
or before 30th Sep or the date of
filing of Annual return
Thus in case of a contractor, if the value charged is less or is in excess of the actual amount
charged from the client, such amount can be revised through the issue of debit or credit note.
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Q115: How do contractors & subcontractors account for the GST if the client has issued the
progress claim (interim certificate / certification of work completion) certificate with the
reduced amount?
If the contract or subcontract links payment with completion of work and contractor or sub
contractor has issued Tax Invoice for certain percentage of completed work charging GST and
thereafter the client issue progress claim certificate to the extent of reduced quantum then
contractor or subcontractor will be required to issue a Credit Note to the client for such
deficient work along with GST thereon within the specified time. However practically it may be
very difficult to handle such cases where the contractor refuses to issue the credit note in which
case the process of invoicing matching may never be complete. Hence it will be interesting to
note how the industry overcomes this issue.
Q116: How the invoice can be issued in case of extra work assigned by the client?
Extra work assigned by client over and above present scope of supply will be treated as a
separate supply in itself and invoicing for such extra work will be made as per agreement
between supplier and client as per Time of Supply provisions i.e. upon completion of work.
However, if such extra work is recognized after the final bill or the RA bill is issued, under such
circumstances, a debit note would be required to be issued to the client within the specified
time frame.
Q117: A. Can a contractor issue Running Account Bills (RA Bills) instead of Tax Invoice?
No. Under the Model GST Law, as per clause 23, it is mandatory to issue Tax Invoice by
a taxable person other than the one opting for composition scheme. Hence, it would be
essential for contractors and subcontractors to issue Tax Invoice in addition to the current
practice of only issuing a Running Account Bill .
B. Under the current VAT regime in most states, the seller is required to prepare tax
invoice for sales within the state and retail invoice for interstate sales. Whether the registered
taxable person, a contractor will be required to issue different invoices for intra state supply
and interstate supply under the GST?
Section 23 of the Model GST Law carries the provision regarding issuance of tax invoice and
bill of supply. The said section speaks that tax invoice is required to be issued in case of taxable
supply of goods and or services and bill of supply is required to be issued for nontaxable
supply of goods and services. Hence, there is no discrimination between intrastate and inter
state supplies under GST.
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C. Is there any penal provision for charging IGST instead of CGST/SGST while issuing
Tax invoice?
Section 66(1)(i) provides for imposing penalty for incorrect return Which is as under:
supplies any goods and/or services without issue of any invoice or issues an incorrect or false
invoice with regard to any such supply;
shall be liable to a penalty of rupees ten thousand or an amount equivalent to the tax evaded
or the tax not deducted or short deducted or deducted but not paid to the Government or input
tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently,
as the case may be, whichever is higher.
Section 66(3)(e)
Any person who fails to issue invoice in accordance with the provisions of this Act or rules made
thereunder, or fails to account for an invoice in his books of account;
Therefore, while charging CGST/SGST or IGST by the registered taxable person, he is required
to take due care considering the above provision of the GST Model Law.
Q118: Is it compulsory for a builder/developer to issue a Tax Invoice or mere receipt / demand
note as has been issued today should suffice?
Yes, as per Clause 23 of the Model GST Law, a builder / developer being a taxable person,
making a taxable supply is compulsorily required to issue Tax Invoice.
Q119: I was an unregistered contractor in the first 3 months from the introduction of GST
being covered by threshold exemption. Now my turnover has exceeded the registration
threshold and accordingly I have applied for GST registration within prescribed time. In the
intervening period of application for registration till the actual receipt of GSTIN Registration
in hand can I issue Tax invoice charging GST? If no, how can I recover GST in respect of invoices
issued in this intervening period as I was liable to pay GST to the Government?
You can issue invoices to the customer till the time you have registration certificate in hand
without charging GST. However the fact remains that from the time your turnover exceeds the
threshold exemption, you are liable to pay GST to Government. This aspect has been taken
cognizance of in the Model GST Law u/s 23. As per proviso to Section 23(ii), such contractor can
issue REVISED INVOICES charging GST for the intervening period i.e. period starting from
effective date of registration till the actual date of issuance of certificate for registration.
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Q120: Is an ISD required to issue any document to the place where GST credits are to be
distributed?
Yes. ISDs are required to issue document depicting credit distributed and such document
itself will be considered as Tax Invoice for recipient to claim the credit so distributed.
Q121: My contract price is all inclusive of taxes. In this case also am I supposed to issue Tax
invoice showing GST element separately?
According to Clause 23A of the Draft Model GST Law, if the contractor has entered into an
all inclusive contract with the client for the supply effected than despite the fact that the
contract is inclusive of all taxes, it would be essential to indicate GST in the Tax Invoice
separately.
Q122: What will be due dates for the payment of GST?
The due date for payment of GST will be as follows
Taxable Person Due Date of Payment of GST

Opting for Composition (Below Rs. 50 Lakhs) 18th day from the end of the quarter
Not Opting for Composition 20th day from the end of month
Q123: What would be the rate of interest in case of late payment of GST?
The rate of interest for late payment of GST is not prescribed in Model GST Law but the same
may be notified in due course of time.
Q124: What are the modes of payment under GST?
Inference of the provisions of Section 35(1) read with GST Payment Process released by
the Joint Committee on Business Processes on GST on April 2015 suggest following modes of
payment may be available for making payment of GST
EPayments by Internet Banking
EPayments by Credit/Debit Cards
Payment through RTGS/NEFT by banks
Over The Counter payments upto specified amount
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Chapter :- 11 - Returns & Penalties
Q125: How many types of returns I am liable to file if I have taken the construction work only
in a single State?
As a taxable person performing construction service in a single state, you will be required
to file following
Return No.
Return relating to To be filed by
GSTR 1 Outward supplies made 10th of the next month
by the taxpayer
GSTR 2 Inward supplies received 15th of the next month
by a taxpayer
GSTR 3 Monthly Return 20th of the next month
GSTR 7 Monthly Return for TDS 10th of the next month

(if applicable)
GSTR 8 Annual Return 31st December of Next FY
In addition to above, a taxable person registered in more than one state and required to transfer
the common credits to various states will be required to take a registration as an Input Service
Distributor and will have to file following additional return :
GSTR 6 Input Service Distributor (if applicable) 15th of the next month
Q126: What would be the steps for filing returns under GST?
The detailed process of filing the GST Returns have been provided in the Business Process
Report issued in October 2015. The process can be understood as per below summary:
The taxpayer will upload the invoice wise details of sales register for the month during
which the supplies are made. The said details have to be uploaded by 10th of the next
month.
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The details of purchases will be auto populated by the system and taxpayer shall be
allowed to accept/reject/modify/add the purchases appearing in the name of the
taxpayer. The said details have to be finalized by 15th of the next month.
Certain modification shall be allowed in the sales register on account of differences
between the purchases shown by the customers and sales shown by the taxpayer. No new
sales invoices will be allowed to be entered. Only invoices which are a result of differences
because of the purchase shown by the customers will be allowed to be
amended. The same shall be complied by 17th of the next month.
The online portal shall autopopulate various details such opening balance, ITC eligible in
the current period, reversals of incorrect ITC and a tax liability shall be generated by the
system itself.
The taxpayer is required to pay the taxes and thereafter file the return by 20th of the next
month.
Q127: What shall be the contents in GSTR 1?
The GSTR 1 would contain the basic information of the taxpayer like name and GSTIN
Number, the period for which return is filed, gross turnover of the assessee in the previous year
etc. Thereafter, the taxpayer is required to file the following details (the details are provided in
the Business Process Report issued by the Joint Committee):
For all supplies which are B2B (business to business), invoice level details will be required
to be uploaded
For all supplies which are B2C (business to consumers), the taxpayer will upload invoice
level details in respect of every invoice whose value is more than Rs. 2,50,000/.
For invoice below Rs. 2,50,000/ statewise summary of supply statement shall be filed
covering those invoices where there is address on record. (address on invoice is
mandatorily required in every invoice having a value of Rs. 50,000/)
Invoices having a value of less than Rs. 50,000/ and which do not have address on record
shall be treated as intrastate supply.
Q128: How will the credits under GSTR 2 be ascertained?
The GSTR 2 would contain the basic information of the taxpayer like name and GSTIN
Number, the period for which return is filed etc. the information submitted in GSTR 1 by the
counter party supplier of taxpayer will be auto populated in the concerned tables of GSTR 2.
The details of inward supplies as auto populated in the GSTR 2 may be modified i.e.
added or deleted by the taxpayer while filing the GSTR 2. The recipient would be
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permitted to add invoices (not uploaded by counter party supplier) if he is in possession

of invoices and have received the goods or services.
The taxpayer will need to select the eligibility as well as ineligibility of the Input Tax
Credit
in relation to the inward supplies.
There will be separate table for Input Service Distributor Credit received by the taxpayer.
There would be a separate table for TDS credit if any received by the taxpayer.
Autopopulation in this return from GSTR 1 will be done on or after 11th day of the succeeding
month. Additions and deletions of the invoice by the taxpayer will be permitted between 12th
and 15th of the succeeding month in case if there is any changes in the inward supplies.
Q129: What are the details to be filed under GSTR 3?
The GSTR 3 would capture all the following information automatically:
Basic details of taxpayer

Period of Return
Turnover details including aggregate level of outward and inward supply from GSTR 1
and GSTR 2
Input Tax Credits, Tax Deducted at Source and Input Service Distributor Credits
Separate Tax liability under CGST/SGST and IGST
Details of other liabilities and charges, if any i.e. interest, penalty, fee etc.
Most of the details of GSTR 3 will be auto populated. However, initially taxpayers may be
allowed fill the missing details. This return may be a consolidated return for all the supplies and
transactions entered by a taxable person during the month.
Q130: I have found a mistake in GST Return, whether revised return can be filed? What shall
be the time limit to file such revised return?
There is no provision for revision of return under the GST Model Law. However, the following
points are useful:
All unreported invoices of previous tax period would be reflected in the return for the
month in which they are proposed to be included. The interest, if applicable will be auto
populated.
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All underreported invoices and ITC revision will have to be corrected using credit/debit
notes and such credit/debit note would be reflected in the return for the month in which
such adjustment is carried out.
The credit/debit note will have provision to record original invoice, date etc. to enable the
system to link the same with the original invoices
Q131: How many types of returns I am liable to file if I have taken the construction work in
multiple States?
If you are supplier of construction services in multiple states, you will be required to file
in addition to the returns stated above for a provider of service in a single State along with all
the returns prescribed in each of the other States where you are registered and have provided
the construction services. Further, if you have obtained Input Service Distributors (ISD)
registration than each ISD will be required to file GSTR 6 additionally by 15th of next month.
Q132: If I am paying tax under composition levy as a small service provider, which type of
return would I be liable to file? What details will be incorporated in the return?
After crossing the threshold exemption limit, the taxpayers may opt for compounding
scheme wherein they would be required to pay taxes at fixed rate without any ITC facilities.
Such taxpayers would be required to file a simplified quarterly return, GSTR4 as per the format
prescribed.
In this return the taxpayer will only require to indicate the total value of supply made during
the period of return and the tax paid at the compounding rate along with the details of payment
of tax in the return.
The compounding taxpayer will also need to declare invoicelevel purchase information (auto
populated from supply invoice information uploaded by counterparty taxpayers) for the
purchases from normal taxpayers.
The Compounding taxpayer will also be required to submit details of the goods and services
imported from outside India if any. The Compounding taxpayers would also be allowed to
export supplies outside India.
Q133: If I am a nonresident / casual tax payer, which type of return I would be liable to file?
What details will be incorporated in the return?
NonResident foreign / Casual taxpayers would be required to file GSTR5 for the period
for which they have obtained registration within a period of seven days after the date of expiry
of registration. In case registration period is for more than one month, monthly returns would
be filed and thereafter return for remaining period would be filed within a period of seven days
as stated earlier.
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Q134: What will be the penalties in case of late filling of returns?
The late filing fee as per prescribed limits is as under:
Return No. Late Fee

GSTR 1 to Late filing fee of Rs. 100/ per day from expiry of due date till failure is
GSTR 7 rectified subject to maximum of Rs. 5,000/ is prescribed for each return
separately
GSTR 8 Late fee of Rs. 100/ per day from expiry of due date till failure is rectified
subject to maximum 0.25% of all India turnover is prescribed for failure
to file annual return is also prescribed (each state)
Q135: Is there any penalty for nonissuance of TDS certificates after filing of return?
TDS certificates are required to be issued within 5 days of filing of the TDS Returns. In case
there is delay in issuing a certificate, a late fee of Rs. 100 per day from expiry of 5 days till failure
is rectified subject to maximum of Rs. 5,000/.
Q136: What will be the procedure to match, reverse and reclaim the input tax credit and
output liability under GST?
Information of ITC would be updated almost on a real time basis. The ITC claim will be
confirmed to purchasing taxpayer in case of matched invoices after 20th of the month of the
tax period month provided counter party supplying taxpayer has submitted the valid return.
In cases where the amounts are not matched within a stipulated time frame, auto population
of ITC reversals shall be made in the subsequent periods return.
Thereafter once the details of such invoices are resubmitted by the counter party, the
purchasing taxpayer will be able to take such credit.
Q137: Whether any penalty is leviable in case of nonpayment or late payment of GST?
The penalty provisions are synchronized with the existing provisions in the Finance Act, 1994
as under:
Particulars Penalty
In case tax is not paid for reasons other Penalty may be imposed not exceeding ten
than fraud or any willful misstatement or percent of tax so demanded or ten
suppression of facts to evade tax thousand rupees, whichever is higher
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In case tax is not paid for reasons of fraud Penalty shall be equal to 100% of the tax so
or any willful misstatement or demanded.
suppression of facts to evade tax
If tax and interest is paid before issuance of
notice, then maximum penalty shall be
15% of the tax demanded.
If tax is paid within 30 days of issuance of

notice, then maximum penalty shall be
25% of the tax demanded
If tax is paid within 30 days of passing of

order, then maximum penalty shall be 50%
of the tax demanded
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Chapter :- 12 - Ongoing Contracts &

Other Transitional Provisions
Q138: Are contracts and projects under progress which span the transitional period (pre and
post GST implementation date) liable for GST?
Yes. The contracts and projects under progress at the time of introduction of GST will also
be liable to GST. It is suggested that the value of work done till the date of introduction of GST
is certified and invoiced to the client with taxes applicable in the preGST regime shall not be
taxed again under GST. However there may be a possibility of double taxation in case of ongoing
interstate works contract if the contractor used the goods in the execution of works contract
and invoice or payment is received after the GST implementation. Hence, it is advisable to take
due care for ongoing interstate works contract while switching over to GST from VAT and CST
Act.
Q139: What are the consequences if I do not make a provision to include the element of GST
in my contract with the client or buyer?
The contracts already entered into with the clients could have the following terms
Prices exclusive of taxes GST is a new tax which replaces the earlier tax regime and hence
the GST taxes can be charged under exclusive of tax contracts instead of the existing
taxes;
Prices inclusive of taxes An impact study of the increase in tax component vis a via the
reduction in cost due to availability of credits on excise duty (which was not claimed under
Construction Contracts where abatement / works contract valuation was adopted) will
have to be conducted and then the findings will have to be communicated to the
customers. If the increase in the tax component is more than the savings in the new
credits, then the same will have to be borne by the client since GST is an indirect tax. In
case the clients are not willing to accept the burden of the additional tax then shelter can
be taken under Section 64A of the Sale of Goods Act, 1930 and the judicial principles
following the said provisions which provide for collection of taxes by the suppliers from
the customers in case of introduction of new levy which was not in existence at the time
of entering into contract.
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Q140: Whether input shall be available on the balances carried forward in the statutory
returns of VAT & Service Tax?
The Model GST Law allows for carry forward of taxes paid on inputs appearing in the VAT
and Service Tax returns filed by the assessee. If there is any subsequent revision of VAT / Service
Tax Returns due to which there is an increase in credit, the dealer will have to apply for a cash
refund of the same. Any increase in credits noticed after the period of revision of returns in the
current scheme will permanently lapse since the existing transition provisions do not refer to
the treatment of credits in this situation though the credit availment in present laws is up to 1
year from the date of invoice for service tax purposes. In case of any decrease in the credit, the
same needs to be settled by payment of cash irrespective of the period to which it pertains.
Example :
An assessee has an unutilized CENVAT Credit of Rs 10,00,000 in the service tax returns filed on
April 25, 2017 for the period October 2016 to March 2017. This credit will be allowed to be
carried forward under the GST regime. In case the assessee notices that he has missed availing
credit of a couple of invoices and revises the return within 90 days from the date of filing the
original return and such increase is credited to the extent of say Rs 1,00,000 The assessee will
have to claim refund of the same. Subsequently, after finalization of audit, the assessee notices
that he has not claimed the credit of another Rs 50,000 This credit will lapse.
Q141: Whether unavailed CENVAT credit on excise duty paid for Capital Goods shall be
available under GST?
The assessee will be entitled to claim the CENVAT credit of the balance CENVAT credit on
Capital Goods for which part credit was already availed in the earlier law.
Q142: I bought goods that were subject to sales tax which are currently held as stock in trade.
Can I claim input tax?
You will be able to claim credit of the goods lying in stock as on March 31, 2017.
Q143: I bought consumable goods that were subject to sales tax which are currently held as
stock in trade. Can I claim input tax?
There is no difference between stock and consumables under GST unlike the earlier VAT
regime. However as far as closing stock held on the date of transition, one would have to see
that whether the credit of these consumables is allowed under the present law, only then the
same can be availed under GST.
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Q144: How do I calculate GST on value of construction work for project that straddles
between two periods that is before and after GST implementation?
Any goods supplied or services rendered after the introduction of GST will be liable to the
new tax. Goods supplied or services rendered before the appointed date will be liable to the
existing taxes. It is suggested that the value of goods supplied and services rendered till the date
old taxation provisions are in effect, should be quantified and invoice be raised on the customer
with applicable pre GST tax laws to avoid any litigations.
Q145: I am currently paying taxes under composition scheme. Can I continue paying taxes at
a single rate without availing credits under GST?
Presently there are no turnover limits for opting to pay taxes under composition scheme
for works contracts under both VAT and Service Tax. However In the GST regime, it is expected
that the assessee having a turnover not exceeding Rs 50 Lakhs would be entitled to pay taxes
under composition scheme without the facility of input tax credit. Any assessee having turnover
exceeding Rs 50 Lakhs will have to pay GST at the Standard Rate and will be eligible to claim
credit of taxes paid on procurements.
Q146: Can a composition dealer not availing credits of procurements be entitled to claim
input tax paid on goods lying in stock as on the date of implementation of GST?
Composition Dealers are not allowed to avail credits in the current tax regime. However,
in the GST regime, dealers will be able to claim the credit of goods lying in stock as on the GST
appointed date. The dealers will have to maintain correct records of the goods procured along
with the invoices issued by the vendors charging tax on the goods so procured.
Q147: If the dealer is paying service tax under abatement scheme and not claiming credit of
excise duty paid on inputs, can the credit of such excise duty be claimed on the stock lying in
stock as on the date of implementation of GST?
The transition provisions of GST are not clearly worded but we are of the view that if the
dealer is in possession of the original excise invoice then he will be entitled to claim credit of
the same as transitional credit provided such goods on which credit is being claimed is forming
part of closing stock as on the date of GST implementation.
Q148: M/s XYZ is a Builder and is presently under Composition Scheme under Gujarat VAT
(0.6%) and under Service Tax (4.5%). From 142017, GST is in force and there are no
composition schemes for builders under GST. What happens in the Post GST Regime to
following issues related to his running scheme which may take another six months to close :
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a. Existing Credits lying as Closing balance in Service Tax Returns. No such balances are
lying in the VAT returns due to composition scheme.
Section 143 allows registered taxable person to avail credits of amount of CENVAT credit
carried forward in the service tax return. Since no credits are available in the VAT returns,
possibility of carry forward under GST regime does not arise.
b. 50% unavailed Excise credits on Capital Goods
Section 144 allows registered taxable person to avail the unavailed credit of excise duty
on Capital Goods
c. Unavailed credit of VAT on capital goods due to composition scheme
Section 146 allows credit to taxable person who was under composition scheme under the
present laws. The provisions only provides for credit availment relating to inputs. There is no
mention of capital goods in the same provision and hence based on the current model law the
credit on capital goods is not available.
d. Unavailed credit of VAT on Closing Stock of Goods due to composition scheme
In a case where registered taxable person was paying taxes under composition scheme
under the earlier laws, Section 146 allows credit on inputs held in stock, WIP or finished goods
post GST implementation.
e. Service Tax and VAT credit lying in the unbilled Work in Progress as per books of
accounts
There is no specific provision for availment of credits which have not been availed under
Section 143 or which are lying in Work in Progress (as the provision only talks of semifinished
goods and not semifinished services). Any revision of the returns under the present law for
availment of additional credits would require filing of refund claim towards such additional
credits.
f. Bookings received after receipt of BU certificate for projects which are running from the
preGST regime, but BU having been received in the postGST regime? Also guide on
reversal of service tax credit in such cases?
As per Schedule II If the entire consideration is received after receipt of BU certificate then
the transaction will not be liable to GST. No specific provisions have been issued under the
model law relating to reversal of service tax credits. Logically, proportionate credits need to be
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reversed considering the consideration received after BU certificate as exempt / nontaxable

supplies.
g. Pending future collections from customers where bookings had already been done in
the preGST regime
Section 159 states that goods / services supplied after the date of GST implementation will
be liable to GST. Section 160 provides that if the consideration for supply is received before the
date of GST implementation and tax paid on such consideration, then no tax will be applicable
under GST. Since Section 159 is specific to Works Contract and the pending collections relate to
goods / services supplied prior to the GST implementation, the same will be liable to service tax
and / or VAT as the case may be.
This leads to incorrect conclusion since taxes will have to be paid under laws which do not exist
under the GST regime. It would thus be logical to levy GST on these transactions unless the
taxable event has already taken place in the earlier law.
h. Return of Cement (Free Issue Material) by contractor issued earlier in PreGST regime
In case the goods are returned within 6 months from the appointed date of GST (and were
dispatched 6 months prior to the appointed date of GST) then the contractor is not required to
charge tax on such supply of goods to the issuer
i. Bookings where complete collection is received in PreGST regime, however major work
is executed in the Post GST regime
Section 159 states that goods / services supplied after the date of GST implementation will
be liable to GST. Section 160 provides that if the consideration for supply is received before the
date of GST implementation and tax paid on such consideration, then no tax will be applicable
under GST. Since Section 159 is specific to Works Contract and the majority of supply relate to
goods / services supplied post GST implementation, the same will be liable to GST.
This leads to incorrect conclusion. Under the present law, service tax would have been paid on
advances based on Point of Taxation Rules, 2011. Once the transaction has been taxed under
the earlier law, the same should not be made liable to tax under the GST law
j. Bookings where the first payment is due on 142017 as per the Agreement to sale, but
where the customer fails to make the payment
Since the payment falls due in the GST regime and no point of taxation arises in the earlier
regime, such amount will be taxable under the GST regime. Further as per the Time of Supply
provisions, the tax under GST in case of such continuous supplies is due on the due date of
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payment mentioned in the agreement assuming other key events triggering the time of supply
like advances / invoicing have not taken place.
k. Return of Aluminum windows to Construction Site by Job worker after fabrication
Section 152 provides that in case the goods are returned within 6 months from the
appointed date of GST (and were dispatched 6 months prior to the appointed date of GST) then
the job worker is not required to charge tax on such supply of goods to the issuer
l. Outstanding Disputes with the VAT and Service Tax Department
Any proceeding leading to output tax being confirmed or rejection of input tax credit to be
recovered as arrears of GST. Any proceeding leading to increase in input tax credit to be allowed
as cash refund.
m. Credit of Service Tax on a contractor bill which was left out due to mistake in PreGST
regime
If the credit is reflected in the revised returns, then cash refund of the same can be availed
else the credit will lapse
n. Future booking cancellations where service tax and VAT was already paid in the Pre
GST regime
No provision under the present draft GST law to cover such cases. Ideally refund should
be allowed in all such cases.
o. Price Enhancement of the flats in Post GST regime where complete service tax was paid
in the PreGST regime
As per Section 153, any upward revision of contracted rates would be liable to GST
p. Retention Payments to be made to contractors where the builder is liable to pay service
tax under Reverse Charge under GST
If such transactions have not been taxed in the preGST regime either under the forward
or reverse charge, the same would be subjected to reverse charge in GST if covered in the
appropriate list.
q. Deduction towards the value of land for fresh bookings
We need to wait for Rules / Exemptions or valuation mechanism on this aspect. Kindly refer
the chapter on valuation of this book.
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Chapter :- 13 - Taxability of SubContractors
Q149: Whether any exemption is available to subcontractors under GST?
The exemption / negative list under GST has not been issued under the Model GST Law
released by the Finance Ministry. GST is expected to have less exemptions and hence there may
not be any exemptions to the subcontractors. However, if certain contracts are exempted from
GST then the exemption should be extended to subcontractors else the tax charged by these
subcontractors would form part of the works.
Q150: Whether the ongoing exemptions under service tax / vat would be available under
GST? If no, whether the government would refund such taxes?
As mentioned above, the exemptions could be restricted and hence even the contracts
which are currently enjoying exemptions would be covered under the GST net. If the
Government had promised these exemptions, then Government might have to continue these
exemptions under either upfront exemption or refund route based on the principles of
promissory estoppel. Other cases like exemption from service tax on construction of roads,
dams etc. were not promised by the Government and hence the exemptions on the same may
not continue.
Q151: Whether the subcontractor can claim the exemption if the main contractor has duly
discharged the liability?
In the present law, it is possible (though disputable) not to pay taxes when the main
contractor has already discharged taxes. While the same position may hold good in GST as well
since the Government has got their share of taxes on the transaction being executed, however
the GST structure would become unworkable if subcontractors do not pay the taxes under the
guise that the main contractor has paid taxes. The system is built to ensure that the seller
uploads his tax remittance details by linking it to the customer registration number and the
customer avail the credit of the same for set off against his output tax liability.
Q152: Whether tax planning under GST would be relevant in case of subcontractor opting for
the composition scheme?
Under the GST regime the contractor will not get deduction to the extent of work done and
billed by the subcontractor under the composition scheme and hence the tax charged by the
subcontractor would form part of the cost of the project. Further, the tax on procurements of
subcontractors would also form part of the cost since the subcontractor would not be entitled
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to avail any credits. Accordingly, it is suggested that in case the projects are not exempt from
tax (and subcontractors are also not exempt from tax on exempt projects) then the sub
contractor should not opt for payment of taxes under composition scheme.
Q153: Whether TDS (WCT) would be required to be deducted from the bills of sub
contractors?
The list of contractors who are required to deduct TDS from the bills of subcontracts are
not yet notified. We will need to wait for the Notifications / Rules to be issued for understanding
the TDS implications on subcontractors bills. However assuming that everyone in the chain
would be subjected to GST, any exemption from TDS is uncalled for, except that government
may either keep the rate of TDS very low or may have to build in some mechanism to avoid a
situation of heavy refunds arising out in such cases. For ex. If Mr. A allots a job of Rs. 50 cr to
Mr. B and then MR B further subcontracts to Mr. C at Rs. 45 cr. Then ideally after taking the
credit of taxes charged by Mr. C, Mr. B would only be liable to pay GST on his value addition of
Rs. 5 cr and assuming the rate of GST to be 20%, the said liability would come to Rs. 1 cr. Hence
if the rate of TDS is 4%, the TDS amounts to Rs. 2 cr which results in a situation where Mr. B
would have to claim refund of Rs. 1 cr if there are no other projects being undertaken by Mr. B.
Thus it is suggested that the rate of TDS may either be kept very low say 1% as is currently
mentioned in the Model GST Law or some mechanism may be allowed to tax only the value
addition in such cases like it has been prevailing in most of the state VAT laws as far as
contractor and sub contractors are concerned.
Q154: What will be the impact of taxes and credit on free issue material supplied pre GST
implementation which are lying with the subcontractor as on the date of implementation of
GST?
Free issue material is currently not liable to tax (provided the value of such material is not
recovered from the running bills of the subcontractors) under the regular scheme of taxation
in VAT and Service Tax and even in the composition schemes in VAT (although taxed under the
composition scheme of service tax with some litigations around). Though there are no specific
provisions under the Model GST Law, based on the principles relating to credits, we are of the
view that the contractors will be entitled to take the credit of stock lying with them on the date
of implementation of GST and that the subcontractor would be required to include the value
of such free issue material when he would bill the contractor for the work done as and when
the stock of contractor is used for execution of work.
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Chapter :- 14 - Retention & Withhold Amount
Q155: The construction contract allows the client such as the developer or an individual to
withhold a percentage from the payment of each progress billing pending satisfactory
completion of the entire contract. Is this withholding or the retention amount subjected to
GST?
Retention is money held by the Employer / Client as a safeguard against defects which may
subsequently develop and which the Contractor may fail to remedy. The purpose of
retention is to ensure that the contractor properly completes the activities required of them
under the contract. Retention money is then deducted from all the interim payments made to
the main contractor who then deducts it from all his subcontractors. Half of the amount
retained is released on certification of completion certificate and the remainder is released
upon certification of making good defects if any. Sometimes the contract may require that
retention is kept in a separate bank account.
The retention amount is subjected to GST even if money is not released to the contractor as
such retention money represents the value for the construction. The amount of the progress
billings, including retention money, has to be accounted for GST based on the date of invoice
as stated in the construction contract entered.
However, if the progressive billing is net of retention sum, the contractor may account for GST
on retention when due or upon receipt of money whichever is earlier. Normally, construction
contracts which have been agreed by both parties normally provide for a contractor to render,
from time to time, progress billings as work progresses. Such contracts also normally stipulate
that the contractor be paid, usually after the relevant part of the work has been satisfactorily
completed, as certified by the client, the clients architect or engineer. It may also require the
client to withhold a percentage from the payment of each progress billings pending satisfactory
completion of the entire contract. The retention money/sum withheld is not paid to the
contractor until the conditions for the payment of the money or sum as specified in the contract
are met.
Example: A contractor Mr. A enters into an agreement to construct a project for Mr. B and the
project cost is Rs. 84,000.00. The construction contract entered by both parties allows Mr. B to
retain 5% from the payment of each progress billings pending satisfactory completion of the
entire contract as a retention sum. It also stipulates that the work is scheduled for 2 successive
intervals. In his billing Mr. A will have to account for GST as below :
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Particulars Amount
Progress Payment 1st interim certificate:

Value of material and works RS.30,000.00
Less: Retention sum (RS.30,000.00 x 5%) (RS.1,500.00)
Amount Paid RS.28,500.00
GST (RS.30,000.00 X 20%) RS.6,000.00
Progress Payment 2nd interim certificate:

Value of material and works RS.84,000.00
Less: Retention sum (RS.84,000 x 5%) (RS.4,200.00)
Less: 1st interim certificate (RS.28,500.00)
Amount Paid RS.51,300.00

GST (RS.54,000.00 X 20%) RS.10,800.00
Total retention sum RS.5,700.00
GST paid on retention money/sum RS.1140.00
Q156: When do I have to account GST for the retention sum?
As the retention is deduction towards the amount for the defect services, you have to
account for GST after you get the amount of retention sum, or when you issue an invoice related
to the retention sum, whichever is earlier.
Example: Based on the above example the retention amount is Rs.5,700.00 exclusive of GST.
You must account for GST of Rs.1,140 after you received that amount from your client, or when
you issue an invoice for the retention sum.
Q157: When can my client claim input tax on retention sum?
When you issue him a tax invoice and pay the applicable taxes charged in such an invoice.
As the matching system is likely to be proposed in the Draft Model GST Laws, such amount shall
only be available for availment as a credit when as contractor you pay GST on such amount.
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Q158: My client has deducted and withheld the amount over and above the terms of the
contract from the RA bills and will release after submission of the next bill. When should be
the GST accounted in such case?
Sometimes it may be possible that the client has deducted some amount and has withheld
such amount for any contractual reasons. In case of a developer and builder there are
circumstances that the buyer may withhold some portion of amount which is being due as per
the terms of agreement. Such withhold amounts are possibly over and above the terms of the
contract. Hence, under such cases, you shall be liable to GST when the RA bill is raised to the
client or the amount is due from the buyer / customer. It may be noted that even though such
amount may have not been received from the client or the buyer, GST shall be liable on such
withheld amounts.
Example: A contractor Mr. A enters into an agreement to construct a project for Mr. B and the
project cost is Rs. 84,00,000. Contract allows a retention amount at 5% of the basic billings to
Mr.
B. In case of 2nd running bill, Mr. B withheld Rs. 1,00,000 over and above the retention amount
and paid the final sum to Mr. A. In his billing Mr. A will have to account for GST as below :
Particulars Amount
Value of material and works Rs.3,00,000
Less: Retention sum (RS.3,00,000 x 5%) (Rs.15,000)
Taxable Amount for GST Rs.2,85,000
GST (RS.3,00,000 X 20%) Rs.57,000
Less: Withheld amount (Rs.1,00,000)
Amount Paid Rs.2,42,000
Example : Mr. A, a builder, allotted a unit of complex to Mr. B. The amount of Rs. 8,00,000 for
the installment is due. Due to some reason, Mr. B deducted Rs. 1,00,000 from the installment
amount and paid Rs. 7,00,000. The GST will be accounted on the billed amount i.e. Rs. 8,00,000
X 20% = Rs.1,60,000.
Q159: When should I account and what should be the treatments for the receipts of withheld
payments from the clients? What will be the case if the same is not received in the future?
As the GST on withheld amount is already paid during the time the bill or invoice is raised,
the same shall not be again subjected to GST at the time of receipt of such amount. In case if
the amount is no more receivable in future, it will be a case of bad debts. The reversal of liability
of GST or the credit will not be available in case of such bad debts.
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Chapter :- 15 - Free of Cost Supplies &

Site Transfers
Q160: My client has provided steel and cement free of cost to be used in the execution of
works contract. Whether such amount of steel and cement shall be included?
The implication of free issue of materials has always been a subject matter of debate in
computation of tax both under VAT Act and Service Tax Act. Under the current service tax laws,
the matter is in dispute as to whether to include the value of such free issue in the taxable value
of services or not. In case of M/s. Bhayana Builders (P) Ltd. & Ors. vs. CST, Delhi & Ors reported
at 2013 (32) S.T.R. 49 (Tri. LB), the Larger Bench concluded that such free supplies would not
form part of gross amount charged in the absence of any monetary/nonmonetary benefit
accruing to the service provider. The case is still pending in the Supreme Court.
As per the current draft GST Model Law, as per clause 15(2)(b), transaction value shall include,
the value apportioned as appropriate, of such goods or services as are supplied directly or
indirectly by the recipient of the supply free of charge or at reduced cost for use in connection
with the supply of goods or services being valued, to the extent that such value has not been
included in the price actually paid or payable.
Hence, it is clear that with the provision that all the supply of materials or services in execution
of contract being issued by contractee shall form a part of transaction value for the purpose of
GST. Thus, the value of steel and cement being issued by the contractee shall form part of
taxable value for supply under GST.
With the inclusion of the above clause in the draft Model GST Law, It may be difficult to apply
the stated case law
The valuation of such supplies will be the market value of the steel and cement prevailing on
the date of transfer. It is advisable to issue such materials by charging the GST by the contractee
to avoid any complications at a later date. This would also enable the contractor to avail the
input of GST paid on free supplies. However, if the contractee is unregistered, a declaration can
be taken from the contractee for the value of such free issues.
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Q161: I purchased and supplied the contractor with building materials and workers. Can the
contractor deduct the value charged for these supplies from the amount of progressive
payments due to him?
As per the current draft GST Model Law, as per the clause 15(2)(a), transaction value shall
include any amount that the supplier is liable to pay in relation to such supply but which has
been
incurred by the recipient of the supply and not included in the price actually paid for the goods
or services.
Under such cases the amount of supplies by the client, can be deducted from the value of
invoices and payments of the contractor. However, in case of valuation of the transaction value
for contractor, such value has to be included in the taxable value.
Example : Mr. A enters into an agreement to construct a project for Mr. B. Mr. B has issued
materials worth Rs. 2,50,000 and Labour Charges for the Workers provided worth Rs. 1,50,000
and deducted such amount from total abstract value of Rs. 15,00,000 raised by Mr.B and raised
the net bill of Rs. 11,00,000 after charging GST. However for the purpose of arriving at the
taxable transaction value under GST for Mr. A, the same would be Rs. 15,00,000.
Q162: My client has provided a Tower crane to be used at the site free of cost to be used at
site for construction work. After completion of work, I returned the same to the client.
Whether GST shall be applicable on such supplies?
Under the Draft Model GST Law, clause 15(2)(a), any amount that the supplier is liable to
pay in relation to such supply but which has been incurred by the recipient of the supply and
not included in the price actually paid or payable for the goods or services is required to be
included to arrive at the value for the purpose of GST.
Further transaction value shall also include, the value apportioned as appropriate, of such goods
or services as are supplied directly or indirectly by the recipient of the supply free of charge or
at reduced cost for use in connection with the supply of goods or services being valued, to the
extent that such value has not been included in the price actually paid.
Thus, the tower crane being provided by the contractee shall form a part of the taxable /
transaction value of the purpose of GST and the valuation will be the market value of hiring of
such crane prevailing at the time of usage of such crane.
Q163: My client has provided space in a guest house for residing our employees near the
construction site. Whether GST shall be applicable on such supplies?
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Ther transaction value shall also include, the value apportioned as appropriate, of such
goods or services as are supplied directly or indirectly by the recipient of the supply free of
charge or at reduced cost for use in connection with the supply of goods or services being
valued, to the extent that such value has not been included in the price actually paid.
Hence the guest house space provided by client to the contractor for residence of the
employees,
shall also form part of the transaction / taxable value.
Q164: I have transferred the material from one site in Gujarat to other site in Gujarat.
Whether GST will be applicable on these site transfers?
As per the current Draft Model GST Law, clause 3 of Meaning & Scope of Supply, supply
includes all forms of supply of goods and/or services such as sale, transfer, barter, exchange,
license, rental, lease or disposal made or agreed to be made for a consideration by a person in
the course or furtherance of business.
It is relevant to note that the meaning of scope of supply is very extensive which also includes
materials transferred from one unit / site of the business to the other provided there are two
taxable persons involved. Hence, all such transfers may not be included within the purview of
GST assuming no separate registrations have been taken for the two sites.
Q165: I have transferred the material from one site in Gujarat to other site in Maharashtra.
Whether GST will be applicable on these site transfers?
Since in this case there would be a compulsory transfer from one taxable person to another,
it shall lead to taxability under GST even though without consideration as per the Schedule II
which lists down certain supplies which would be taxed even if done without involvement of
any consideration.
Q166: I have transferred the Capital Asset from one site to other site. Whether GST will be
applicable on the asset transfers?
As per the Model GST Law, branch or site transfer of any goods will be subjected to GST.
Hence it will not make any difference whether the same are inputs, capital goods, raw materials,
consumables or even services which get transferred from one site to other site. This will be
surely going to create difficulty in case of assets being transferred. If the asset is transferred,
even for a day, GST will be applicable on both the transfers.
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Chapter :- 16 - Liquidated Damages & Settlements
Q167: What is GST treatment for damages and out of court settlements?
Authors view is that damages and out of court settlements which are paid for the breach
of warranty or delays in completion of contract, are compensatory in nature. Hence such
settlement cannot be treated as taxable supply and GST need not be charged for such recovery.
However GST is chargeable for settlements that are payments for taxable supplies made.
Example: Main contractor, Mr. A did not complete the building project by the stipulated
completion date stated in its contract with its developer, Mr. D. It is required to pay liquidated
damages to Mr. D at a rate of Rs. 3,000 per calendar day (including Sundays and public holidays)
for every day where the completion of the project is delayed. In our view, such liquidated
damages are not subject to GST as it is compensatory in nature.
However when we look at certain declared services in the model GST Law like agreeing to the
obligation to refrain from an act, or to tolerate an act or a situation, or to do an act which may
create some uncertainty about taxability of these transactions.
Q168: Under the contract, the main contractor is required to carry out rectification works
during the defect liability period. However, since the main contractor did not want to rectify
this defect, another contractor is hired by developer to rectify the poor workmanship done
by the main contractor and as a result additional cost is incurred. What is the GST treatment
on this?
Deduct the cost of rectification work from the retention sum:
Such supplies will be treated as two separate supplies. One supply is from the main contractor
for completing the entire job (though not entirely to the developers satisfaction) on the full
value of the contract (including the retention sum).
Another supply is from the developer to main contractor for the full value of the rectification
works because the developer is making good the defects that should have been done by main
contractor.
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Claim payment from the main contractor:
The developer may go to court to seek payment from the main contractor for the rectification
cost, or this may be agreed by an outof court settlement. Such payment is subject to GST as it
is in relation to taxable supplies made from the developer to the main contractor for making
good the defects which should have been rectified by the main contractor. The main contractor
should still charge the developer GST on the full value of its supply, and the developer should
charge the main contractor GST for the rectification works, similar to (a).
Q169: What is the GST treatment if the compensation only relates to the poor work done and
does not involve any rectification works?
If no rectification work is going to be carried out and the developer is only claiming
compensation from the main contractor for the poor work done, such compensation in our view
is not subject to GST as there is no supply made. The main contractor will still have to bill the
developer for the full value of the contract including the retention sum.
However when we look at certain declared services in the model GST Law like agreeing to the
obligation to refrain from an act, or to tolerate an act or a situation, or to do an act which
may create some uncertainty about taxability of these transactions.
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Chapter :- 17 - Joint Ventures

(Joint Development / Consortium)
Q170: Are tender fees and contract deposits paid by Joint Venturer subjected to GST?
A fees paid in respect of the tender document represents the cost of the document or
sometimes the cost of services for the tendering recovered from the bidder. Such tender or bid
fees, does not represent any supply of goods or services. However, taking a conservative view,
that there is a flow of services and goods from the contractee to the bidder, GST might be
applicable on such fees recovered. In case of contract deposit, if such deposits are refundable
in nature, then GST will not be applicable, but if deposit is nonrefundable, GST will be applicable
on the date of adjustment of such deposit.
Q171: A contract of redevelopment of a society was entered by us with the society, where we
have paid monthly rent to the members of the society for 3 yrs. Whether GST would be
applicable on such transactions?
Under such agreements there are two transactions involved, one in the form of construction
services rendered to the society, and secondly the renting services by members of the society
to the developer for using the land for construction in lieu of Transfer of development Rights
(TDR). Thus, for the consideration received, the builder / developer will be liable for GST. In case
of renting services by members to the builder, members will be liable to GST subject to the
provisions of the other clauses in the Act namely related to pure agent.
Q172: A contract of redevelopment of a society was entered by us with the society, where we
have collected additional consideration from each members and allotted the units after
construction with the additional space. Whether GST would be applicable on such additional
consideration?
Under some agreements where the members of the society have entered into an agreement
for redevelopment of the complexes and have been allotted extra space by the developer or
the builder with some monetary consideration. Such consideration received by the builder /
developer will be subject to GST as the same in lieu of the construction services provided to the
members of the society.
105
Q173: I have sold Floor Space Index (FSI) to another builder for monetary consideration.
Whether GST would be applicable on such FSI units sold?
FSI or Floor Space index is quite a popular concept of construction which is of course an
essential part of realestate industry. Municipal Corporation plays a greater role in completing
the accurate FSI calculation by abiding the established and standard laws. Suppose if the FSI
unit is of 1.0, this simply means that, if the area of the plot is 100 square meters, then 100
square meters of gross floor area has been built on the plot.
Such FSI units can be allotted to builders providing construction services to the Local or Other
Government for the projects such as low cost housing or other entrusted projects. The builder
can sell such units in the open market to other developers or builders, for increasing the level
of floors in the complex or building.
It can be noted that such transfer of FSI units by the developers and builders are in nature of
sale of immovable properties being a right in relation to immovable property and might be out
of purview of GST. It is also relevant to note that there is no element of supply be a service or
goods is involved in such transactions. However the manner in which services have been
defined to include anything other than goods creates a room for uncertainty on transfer of such
rights under GST.
Q174: Whether GST shall be applicable on transfer of development rights (TDR) by land owner
to the developer? What would be the valuation in such cases?
As per the explanation to the clause 2 (88) of the Draft Model GST Law, Services include
intangible property and actionable claim but does not include money. Thus any transfer of
intangible property or right shall be regarded as services and hence, looking to the Model GST
Law and the definition of services, such transfers may attract GST. However as explained in the
above question, transfer of such rights in relation to immovable property may be kept out of
GST by way some exemptions expected when the model law is finalized.
106
As far as the current valuation rules and laws are stated in the Model Law, there is a lack of
clarity on part of valuation of such rights. However, it has to be valued as per the market value
prevailing as on the date of transfer.
Q175: I and other contractor, have entered into a contract with the contractee to build a
building where both of us are severally liable for the whole work. I have invested some
amount of capital and provided some of the materials in the contract at cost. Whether GST
will be applicable on capital amount and the materials being transferred?
In case of contractors, there are possibilities that two or more contractors are engaged in
a single contract. All the participants are bound by the terms of the contract and the commercial
activity that they agree to undertake collectively. Such arrangements may be treated separately
and taxed as Joint Ventures .
Contractor 1 JV Provides services to the contractee
Joint
Contractor 2 Contractee
Venture
Contractor 3
As per clause 2(74) definition of a person includes, an association of Persons or a body of

individuals, whether incorporated or not, in India or outside India. Here it is pertinent to mark
that the Joint Ventures formed and the members or the participants of the Joint Ventures are
distinct person in the eyes of the Law. Hence, all such transactions between the participants
and the JV will be subject to GST.
As per the explanation to the clause 2 (88) of the Draft Model GST Law, Services include
intangible property and actionable claim but does not include money. Thus any contribution
towards capital in the JV by the participants shall be out of the scope of services and GST will
not be attracted on such monetary transactions including unsecured loans. Thus, GST will be
applicable on all the material and services provided by and to JV but will exclude the capital
transactions.
107
Chapter :- 18 - Job work & Onsite Manufacturing
Q176: My client has issued materials for constructing a building, where only labour services
were provided by me. Will the work be considered as a Job Work?
As per the clause 2(62) of the draft Model GST Law, job work means undertaking any
treatment or process by a person on goods belonging to another registered taxable person and
the expression job worker shall be construed accordingly.
Thus, any process or treatment of goods will be considered as a Job Work. The relevant fact
that can be noted here is that there must be involvement of goods. The definition of goods
means, every kind of movable property other than actionable claim and money but includes
securities, growing crops, grass and things attached to or forming part of the land which are
agreed to be severed before supply or under the contract of supply. Thus, goods includes every
moveable property, and clearly excludes immoveable property.
Accordingly in case if only labour services are provided to construct, alter or repair any part of
building, the same may be considered as a Job Work.
Q177: I have supplied cement, metal stones and other materials to the Ready Mix Concrete
(RMC) supplier to be used at the construction site. Whether this would be considered as Job
Work? Whether GST would be applicable on supply of such materials to RMC supplier?
As per the current draft Model GST Law, Job Work includes any process or treatment of
goods. It can be said that there is element of process involved in goods supplied such as cement,
metal stones, etc. and the processed product is Ready Mix Concrete (RMC). Thus, this would be
considered as Job Work.
As per the clause 43A (1) for Special procedure for removal of goods for certain purposes, the
Commissioner may, by special order and subject to conditions as may be specified by him,
permit a registered taxable person to send taxable goods, without payment of tax, to a job
worker for jobwork and from there subsequently to another job worker and likewise, and may,
after completion of jobwork, allow to
i. bring back such goods to any of his place of business, without payment of tax, for supply
therefrom on payment of tax within India, or with or without payment of tax for export,
as the case may be, or
108
ii. supply such goods from the place of business of a jobworker on payment of tax within
India, or with or without payment of tax for export, as the case may be.
Thus, any goods being sent to the place of the Job Worker, would not be liable, however,
on reading the provision, a prior approval from the commissioner may be taken to supply
goods without charging tax.
Q178: I have supplied the steel pipes and roads to a fabricator to prepare a grill and install
the same on the building constructed by me. Whether GST would be applicable on supply as
the end product delivered is attached to the building?
The transaction will be covered within the meaning of Job Work and goods even though
the end product is attached to the building. Thus, GST will not be applicable on such supplies.
109
Chapter :- 19 - Reverse Charge Mechanism &

Tax Deduction at Source
Q179: Whether for any supplies the developers / builders / contractors or the sub
contractors are liable to GST under Reverse Charge?
As per the clause 2(85), reverse charge, means the liability to pay tax by the person
receiving goods and / or services instead of the person supplying the goods and / or services in
respect of such categories of supplies as the Central or a State Government may, on the
recommendation of the Council, by notification, specify. In case of specified supplies the
receiver of the supply will be liable to GST rather than the supplier itself, which will be regarded
as reverse charge.
Under the current services tax laws, services such as works contract services, advocate services,
goods transport agency services, manpower supply services, etc. are covered under the reverse
charge mechanism. As far as the current GST Model Law is concerned, the clarity on applicability
of reverse charge supplies are not defined. It is expected that such supplies on which reverse
charge will be applicable would be defined through GST rules.
Q180: When I have to account and liable to GST under reverse charge?
As per the clause 12(5), time of supply shall be the earliest of the following dates in case
of reverse charge,
i. the date of the receipt of goods, or
ii. the date on which the payment is made, or
iii. the date of receipt of invoice, or
iv. the date of debit in the books of accounts.
Q181: Whether URD (Unregistered Dealer) purchases would be liable to GST under reverse
charge?
Under the current VAT Laws, purchases from the unregistered dealers are liable to VAT with
the highest rate applicable. As per the current Model GST Law, there is lack of clarity on
110
applicability of reverse charge or the supplies on which reverse charge will be applicable. It is
expected that the reverse tax in case of unregistered dealers will be continued under the GST
also.
Q182: What will be the place of supply under reverse charge?
The provision of place of supply will remain the same and apply to the reverse charge as
it applies to forward charge supplies. No separate provisions are made for place of supply in
case of reverse charge.
Q183: I have engaged a contractor for constructing a building. Whether I am liable to deduct
TDS under GST?
As per clause 37 related to Tax Deduction at Source, of draft GST Model Law, the Central
or a State Government may mandate:
i. a department or establishment of the Central or State Government, or
ii. Local authority, or
iii. Governmental agencies, or
iv. such persons or category of persons as may be notified, by the Central or a State
Government on the recommendations of the Council
to deduct tax at the rate of one percent from the payment made or credited to the supplier of
taxable goods or services, notified by the Central or a State Government on the
recommendations of the Council, where the total value of such supply, under a contract,
exceeds rupees ten lakh.
Hence, as per the above provision the applicability of TDS is only in case if the contract is allotted
by Government Departments and Agencies, and will not apply to any private body. However, it
is expected that the applicability of TDS will be defined in order to avoid nonpayment of taxes
by any party with in the chain.
111
Brief Profile of other Co-Authors: -
Advocate Samir Siddhapuria, practicing Gujarat VAT & CST

since last 12 years. During the course he has handled VAT
assignments from several large corporates and has also
appeared before the VAT Tribunal on behalf of these clients.
He has also authored several books on Gujarat VAT and has
also given presentations at various forums.
CA Dayananda K, worked at Sonata Software Limited. Then,

joined as partner of M/s Vishnu Daya & Co. Presently heading
the indirect tax team of firm. Qualified as CPA from US. Has
given lectures in various forums and branches of ICAI in
Indirect taxes and Exim Policy. Taken class to the various
department officials. Contributor to the All India VAT Ready
Reckoner for Karnataka and TN VAT laws.
CA Harshit Shah, presently associated with ConsultingEdge, is

a practicing Chartered Accountant with postqualification
experience of 7 years. With his experience in indirect taxes,
Harshit has handon experience of Maharashtra VAT, Central
Sales Tax and Service tax related aspects. Harshit is also
conducting regular Corporate Trainings for private and public
sector companies and is a regular faculty at National Academy
of Customs Excise & Narcotics (NACEN), Mumbai. Harshit has
also authored book on compendium VAT Laws in
Maharashtra a private circulation book published by V J
SHROFF & Co.
112
CA Keval Shah currently associated with ConsultingEdge, is a

practicing Chartered Accountant, having experience of over 6
years into indirect taxes. Keval actively contributed in
preparing the representation on Model GST Law on behalf of
WIRC of ICAI. Keval regularly undertakes various lectures at
various forums like ICAI, CTC, and BCAS. Keval is a visiting
faculty in a management institute (Indo German Training
Centre) for more than 5 years. He regularly conducts training
sessions for Department Officers of Central Excise and Service
Tax organized by National Academy of Customs Excise &
Narcotics (NACEN).
CA Hanish S, completed CA in 2008 and has also completed CS,

LL.B and B.Com. He has been practicing as a Chartered
Accountant for 6 years and specializes in Indirect Taxes. He
was part of the committee formed by ICAI which released a
book on Transition Issues under GST regime. A regular
speaker at various forums on Indirect Taxes and faculty for
indirect taxes and accounting in Bangalore.
CA Deepak Gulati is FCA, LLB, and a practicing Chartered

Accountant in Delhi. He specializes in Delhi VAT matters and
is also a faculty for Officers Training of Delhi VAT Department.
He is also a speaker of VAT matters at various forums and
consultant to many PSUs, Corporates and other business
organizations.
113

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Edition : September, 2016.

Who has been a constant source of positive energy

This is our third book after

Simplifying Multi State VAT on Works Contract

(Second edition published in Sept

Qualified as Chartered Accountant in 2004. Has been in

Has handled several professional assignments related to Construction, Real

Graduate in Commerce having core competencies in the

Name Place Mobile EMail

CA Harshit Shah Maharashtra 9769156261 harshit@consultingedg

CA Deepak Gulati New Delhi 9810006345 dga@dga.in

As far as GST is concerned we can help you in :-

ii. About Authors ..................................................................................................

1. Existing Controversies ..................................................................................................... 1

2. Introduction & Overview of GST ..................................................................................... 8

3. Registration under GST .................................................................................................. 14

4. Taxable Supply of Goods & Services.............................................................................. 22

5. Exemption & Negative List (Including Supplies to SEZ) ................................................. 32

6. Time of Supply ............................................................................................................... 38

7. Place of Supply & Future of Old Plannings in CST ......................................................... 46

8. Valuation of goods & services ....................................................................................... 55

9. Input Tax Credit under GST............................................................................................ 65

10. Invoicing, Payments & Debit Notes ............................................................................... 77

11. Returns & Penalties. ...................................................................................................... 83

12. Ongoing Contracts & other Transitional Provisions ...................................................... 89

13. Taxability of Sub-Contractors ........................................................................................ 95

14. Retention & Withhold Amount ..................................................................................... 97

15. Free of Cost Supplies & Site Transfers......................................................................... 100

16. Liquidated Damages & Settlements ............................................................................ 103

17. Joint Ventures (Joint Development / Consortium) ..................................................... 105

18. Job work & Onsite Manufacturing............................................................................... 108

19. Reverse Charge Mechanism ........................................................................................ 110

iii. Brief Profile of Other Co-Authors ......................................................................... 112

Chapter :- 1 - Existing Controversies

Conversation between a Contractor / a Real Estate Developer / an

Reply from the God :

Response from the author :

Current Complications in the Construction Sector

Treatment of works contracts Firstly identifying whether a contract is a pure sale or a

Chapter :- 2 - Introduction & Overview of GST

Goods & Service Tax

Central Goods & Service Integrated Goods &

It is expected the following rates may be prescribed under GST,

SGST + CGST % Supply of Goods & Services

As per Clause 18 of the Constitution (122 Amendment) Bill, 2014 (Constitutional

Chapter :- 3 - Registration Under GST

Q7: Who is liable to be registered?

Registration no is required to be obtained compulsorily by the person if the person is covered

Q11: What is the procedure to get registered?

The registered person has contravened provisions of the Act.

Chapter :- 4 - Taxable Supply of Goods & Services

Q19: Does the model law define what a supply is?

Joint Development Agreement

Transfer of Units in form of

Transfer of rights to use the intangible assets.

Movement of Plant and Machinery from one

Transactions covered under Schedule II as a supply of services :

G. construction of a complex, building, civil structure or a part thereof, including a complex

Transactions covered under Schedule II as a supply of goods :

a. Construction of complex and works contracts shall now be treated as services

Right to Use Goods and Intellectual Properties Right

Consideration for nonappearance in a court of law or withdrawal of suit.

Chapter :- 5 - Exemption & Negative List