Precautions in GST for Construction / Project Sector

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compliance and IT related services related to the construction
sector under one roof.
Focus Areas :-
Corporate Governance
Management Audit
Project Budgeting and Monitoring
Indirect Tax Compliances
Corporate Training
Information Technology and Allied Services
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Indirect Tax Services
Advice on the applicability and levy of Service Tax, CST and State VAT
on Contracts entered into or proposed to be entered into by the
company.
Assistance in the structuring of transactions and agreements in relation
to inter-state and intra-state sales to optimise the tax incidence
Conduct tax based health checks to determine the service tax & Multi
State - VAT implications on the operations,
Giving Multi State VAT opinions

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developments.

Issue – Commencement of GST
 Concern -
 Whether GST will be implemented simultaneously in all the
States ?
 Whether the new law will commence from the start of a
financial year or complexities will prevails ?

Topic - Definition and coverage

Issue - Coverage in Service definition
 Concern -
 Will service include service for Government ?
 Whether service will include service in the course of
business only ?
 What will be the proposed treatment of individuals
selling occasional items of personal effect ?

Issue – Definition of Govt.
 Concern –
 To suitably include Government corporations
not working for profit.

Issue - Definition of input service – Overview to
remove anomalies
 Concern -
 Whether definition of ‘input services’ be redrafted to cover
only those services which are procured for rendering
taxable services ??
 Would input services include input service on capital
structure ?

Topic - Deemed Sale Transactions

Issue – Impact of deemed Sale transactions
 Concern -
 Whether it would be treated as either goods or service
or composite nature ?
 Whether GST would be levied as a sum of both VAT and
Service tax or on specified % basis ?
 Whether any composition scheme without ITC
would be available ?

Topic - Taxable value related
issues

Issue - Valuation where whole consideration is
not in money (Consideration in kind )
 Concerns -
How act will define the provisions for valuation of
consideration where consideration is other than
money ?
Presently, As provided under Rule 8 of Excise
Valuation Rules, Value of the Goods taken as 110%
of cost of the Goods.

Issue – Abatement on Construction Services
for land
 Concerns -
 As stamp duty is not to be subsumed, will government
exempt land from GST ?
 How will government deal for removing cascading
effect ?

Topic - Sub - contracting

Issue – Treatment in case of sub-contracting
 Concerns -
 Whether GST would ensure same treatment
under various proposed statues of center and
state ?
 Presently different treatment is given to sub-
contractors under VAT and Service Tax

Issue – Supplies to contractors/sub-contractors of SEZ
developers/units
 Concerns -
 Whether new levy will ensure that supplies made to the
contractors/sub contractor of the developer/unit for carrying
out their authorized operations are exempt ?
 Presently, different statues prescribe different treatments

Topic – Input Tax Credit

Issue - CGST-SGST-Across credit and Additional
GST credit
 Concerns -
 Whether across credit would be allowed ?
 If no, cost will increase to a huge extent as rates of GST are
already high.
 Whether Input credit of tax paid as Additional GST would be
allowed ?

Issue - Provision for Bad Debts and Reversal
of CENVAT Credit towards Bad Debts / write
offs
 Concern –
 Whether tax reversal mechanism be allowed for bad debts,
without consequent reversal of Input Tax Credit ?
 It duly is paid looking to the typical nature of construction
sector with tendency of excessive billing.

Issue – ITC on closing stock held
 Concern -
 Whether government will allow carry forward of ITC on closing
stock held on transition date ?
 Whether the same can be claimed as refund ?
 Whether the same will get lapsed ?

Issue – Non-removal of condition of payment in case of partial
reverse charge Credit Mechanism
 Concern -
 Whether Partial reverse charge credit mechanism to
be replaced with Full reverse charge ?

Issue - In terms of Rule 6 of CCR, a provider of both taxable and exempt
service is liable to reverse credit pertaining to exempt service
 Concern -
 What procedure will be laid down for availment of credit by a
service provider rendering both taxable and exempt services ?
 The current rule is very complex leading to a lot of litigations.

Issue - Time Limit for Availment of Cenvat Credit on
Input and Input Service
 Concern -
 What time limit would be prescribed for availing input
tax credit ?
 What will be the point of credit availment ?

Issue - Inter-unit transfer of credit by Large Taxpayer
Units (LTUs)
 Concern –
 Looking to the objective of govt. towards simplification, it
would be interesting to note whether transfer of credit by
large tax payer units would be allowed ?

Issue - Removal of restrictions in availment of Credit on
services related to Civil Construction
 Concern -
 Whether restriction on availment of credit by civil
contractors will prevail or it would be allowed ??

Topic – Tax deducted at source (TDS)

Issue – VAT TDS provisions
 Concern –
 Works contract will loose identity after introduction
of GST regime hence, whether TDS provisions would
be there ?

Topic - Exemptions, Composition and thresholds

Issue – Exemption from Service Tax on Infrastructure
Projects/Sectors and Consulting Engineering Services
 Concern -
 Whether these would enjoy exemption from GST ???
 Whether the exemptions would be extended to other vital
infrastructure sectors such as Power Sector, Public Transport Sector,
Water supply, Sewerage, Maintenance of railway projects (including
metro) and other projects in line with the harmonized definition of
Infrastructure ??
 Being the integral part, whether the scope of exemption from service
tax be amplified to include the Consulting Engineering portion of the
services also ??

Issue - Existing exemptions for Manufacturing at sites
 Concern -
 Whether Government would continue existing
site exemptions like manufacturing of precast
and RMC at site for self-consumption, available
to contractors ?

Issue – Treatment of branch transfers
 Concern -
 Whether branch transfers would be exempted
from GST ?
 Presently branch transfers are excluded
specifically

Issue - Current SEZ and power exemptions / Sale to SEZ as deemed
export
 Concern -
 What would be treatment of exemptions issued prior to introduction of
GST ?
 Whether the exemptions would be continued under GST ?
 Further, whether sale to SEZ and relevant units should be treated as
deemed exports and exemption would be provided ??

Issue - Composition and Threshold
 Concern –
 Whether composition would be considered ??
 Whether any threshold would be prescribed ??

Issue - Service Tax exemption for Construction Services in relation to
Residential Units
 Concern -
 Looking into the development of a lot of low cost urban housing
infrastructure, whether It should be considered for exemption
under GST ??

Issue - Taxability of liquidated damages / Reimbursements / Forfeited
Advances
 Concern –
 Whether these amounts be eligible for GST exemption ?

Issue - Service tax on transfer of under-constructed flats by a
customer
 Concern -
 Whether resale of under-construction flats would be
liable to GST ??

Issue - Long term leasing of vacant land (say for 99 years)
attracts stamp duty
 Concerns -
 Presently, definition of renting does not provide any reference
to lease tenure
 Whether these transaction would be exempted under GST ???
 Whether any clarification would be given for removing
cascading effect ??

Issue - Levy of Service tax on Transfer of Development
Rights
 Concern -
 Presently, taxability of development rights
associated with land has not been clarified in
negative list regime
 Whether this transaction be exempted under
GST ???

Issue - Levy of Service Tax on facilities
provided by Employer to Employees
 Concern -
 Presently, they are excluded from the purview of
Service tax
 Whether this would be exempted under GST ???

Transitional complexities viz a viz contractual
agreement variations

Issue - Liability in case of ongoing works/turnkey
contracts
and leases
 Concern -
 Whether govt. will provide a remedy to industry
by restricting GST liability to the extent of tax
payable under the existing system till the
completion of such on-going contracts/
agreements at least for a specified duration of
say 18-24 months ??

Concern -
 How govt. will deal with the exemption provided
on on-going contracts?

Issue - Contractual clauses and Statutory
variations/New levy
 Concern –
 How industry would prepare itself for additional liability created
during the transitionary phase ?
 How amendments in contractual clauses of continuing contracts be
made ?
 Would this be considered a statutory variation or a whole new levy
?

Issue – Blockage of Working capital
 Concern -
 How industry would meet the interest cost of
additional working capital ?

Issue - Purchase-JIT
 Concern -
 Whether industry will adopt JIT method as a
precaution for loss during transitional period ?
 What treatment will be given to consumables ?

Issue - Transitional Tax cost
 Concern –
 How govt. is going to adjust to IT and Staff Training
cost on transition ?
 How govt. is going to compensate loss of profit
figures to high revenue generating states ?
 On what basis compensatory allowances will be
given to state ??

Issue - ERP
 Concern -
 How industry is going to change in accordance
with the change in statue ??

Issue – Whether CST will continue ??
 Concern –
 Whether all the relevant forms under Central
Sales Tax Act like Form C, E, F etc. be allowed to be
filed online ?
 What about forms pending issuance ?

Issue – Pending Assessments
Concern –
 How govt. will square up pending assessments as
on transition date ??

Procedural Aspects

Issue - Point of Taxation
Concern –
Whether relaxation would be provided to
construction sector for retention monies
and typical bill certification mechanism ?

Issue – Interest of delayed payment
Concern -
 Would Interest levy under GST, be as harsh as
the current service tax regime ?

Issue – Place of supply of service
Concern –
 How place of supply of service would be
determined under GST ?
 What if we do AMC of 20 offices of a client under a
composite billing ? Where will the services deemed
to have been consumed ?
 If the construction is undertaken at State A and the
design and architect services are availed by Head
office in State B

Issue – Audit
 Concern –
 Whether there be any audit mechanism
prescribed ?
 What would be the applicability there of ?

Issue – PAN based single Registration number
 Concern -
 Whether separate registration would be there for IGST,
CGST and SGST ?
 Or whether single PAN based registration would be there ?
 Further whether multiple registration system would
continue as per current excise and service tax laws ???

Thank You……Now let us repair GST..

Precautions in GST for Construction / Project Sector

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