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Works Contract- A New Challenge…. (Revised Model GST Law)

Goods and Services Tax - GST - By: - Vatsalya Bhardwaj - Dated:- 4-3-2017 Last Replied Date:- 6-3-2017 - Levy of taxes in case of composite contracts is a complex phenomenon. Most specifically, levy of tax on works contract has witnessed a plethora of cases. Specifically the chargeability of tax on service vis-à-vis goods has always been a matter of discussion before the courts in the present indirect tax regime. The courts have also taken different-different views and always the matter i .....

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te VAT laws Works contract service (Declared service) as per Service Tax As per Sec 2(1)(zo) works contract includes any agreement for carrying out for cash or for deferred payment or for valuable consideration, the building construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, repair or commissioning of any movable or immovable property. As per Sec 65B(54) works contract means a contract wherein transfer of property in goods is involved in the exe .....

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reement 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; In Revised Model GST Law vide, Section 2(110) works contract has been defined as under:- Works contract means a contract wherein transfer of property in goods is involved in the execution of such contract and includes contract for building .....

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ty are outside the purview of works contract now and thus repair and maintenance of any movable property will not be covered under the definition of works contract under revised Model GST Law? If such is not the case and it will still be covered under the definition, then what is the point of deleting or keeping the word in the definition of works contract? Apart from the definition of works contract, there is one more term composite supply which leaves us in situation of dilemma. Definition of .....

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g the aforesaid definitions our question is where will repair or maintenance of movable and immovable property will be covered? Will it be a composite supply of goods and services naturally bundled with each other i.e. to say in Repair and maintenance work, goods and services of labour are naturally bundled and supplied together for the purpose of execution of a contract and if not here, then will it be covered under the definition of works contract given under revised Model GST law, that covers .....

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posite supply or will it be covered under works contract. If it s a composite supply then dispute will be there to decide the principal supply in the contract and if it will be considered as works contract then whole contract will be considered as supply of services (as per Schedule II Entry 5(f)). In order to highlight the controversy, which may arise on account of definition of composite supply and works contract an example of a company entering into Annual Maintenance Contract for computers a .....

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ply of services the dealer pay the necessary tax under GST on raising the invoice or receipt of payment. During the course of assessment proceedings the A.O. may call for details of material used in each of AMC and may take a view that in the cases where substantial material has been used same have to be considered as predominantly for supply of goods and not for services. For example, in case the company has entered into 100 contracts for AMC and has considered the same as contract for supply o .....

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he dealer considers such contracts as works contract, which are to be considered as contract for supply and services and pay tax accordingly, again the AO can raise a plea that these contracts are not in the nature of works contract since contracts involved supply of material as well as services and same are in the nature of composite supply contract. On that basis, he may again raise additional demand in respect of contracts where he holds that predominantly there was material supplied as a par .....

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