TMI Blog2021 (6) TMI 387X X X X Extracts X X X X X X X X Extracts X X X X ..... only a subset of supply as envisaged in Section 7(1) of the GST Act and hence all contracts covered under the Sale of Goods Act, 1930 are also contracts under the GST Acts - The agreement between the supplier and the recipient is of prime consideration and if it is for a continuous supply to be made in installments, then the contract would include all the part supplies made and covered under separate invoices. It is in this context, the supply under a contract should be understood and the total value of such supply under a contract, if it exceeds ₹ 2,50,000-00 would be liable for deduction of tax at source, subject to other conditions. The agreement of continuous supply is a contract for scenario no, 3 and 4 and if the amount involved in the supply in this contract exceeds ₹ 2.5 lakhs, then the applicant is supposed to deduct TDS on the payment credited to the vendor - In the first scenario, since the value of the single invoice is more than ₹ 2.5 lakh, there is no doubt that the tax deduction at source is applicable under section 51 subject to other conditions. In the second scenario, the applicant has clearly stated that the value of supply under a single ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der to minimise the cost of housing for the purpose of benefitting the public. In this process they do purchase of goods and services. 4.2 As per Notification No. 50/2018- Central Tax dated 13.09.2018, they are bound by the CGST provisions under section 51 for the purpose of TDS. However, they stated that they are confused with the intended meaning of the term a contract as they do not have any contract with any supplier. As and when society s activities demand, they procure the goods and services. They do not have any sort of fixed terms on rate/ credit period/ discount/ support services. 4.3 The applicant explains the practical scenarios as under:- 1. Procure goods and services on need basis without any contract, i.e. at the prevailing terms and conditions (at the time of purchase). The value of such supply under single invoice is more than the threshold limit of ₹ 2,50,000.00. 2. Procure goods and services on need basis without any contract i.e. at the prevailing terms and conditions (at the time of purchase). The value of such supply under single invoice does not exceed the threshold limit of ₹ 2,50,000-00. However, the total purchase in a year exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or conditional (3) Where under a contract of sale the property in goods is transferred from the seller to the buyer, the contract is called sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred 5.1 The applicant states regarding the formalities of the contract, as under: Section 5 of the Sale of Goods Act, 1930 defined Contract of Sale as,- (1) a contract of sale is made by an offer to buy and sell goods for a price and the acceptance of such offer. The contract may provide for the immediate delivery of the goods or immediate payment of the price or both, or for the delivery or payment by instalments, or that the delivery or payment or both shall be postponed. (2) Subject to the provisions of any law for the time being in force, a contract of sale may be made in writing or by word of mouth, or partly in writing and partly by word of mouth or may be implied fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) set up by an Act or Parliament or a State Legislature; or (ii) established by any Government, with fifty-one per cent or more participation by way of equity or control, to carry out any function (b) society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860) (c) Public Sector Undertakings Hence basically, entities of / related to Government are only required to deduct the tax. Section 51(1) prescribes that the TDS is to be deducted from the payment made or credited to the supplier of taxable goods or services or both, where the total value of such supply, under a contract exceeds INR 2,50,000-00. From the above, it appears that TDS provisions are attracted if the taxable value under a contract exceeds INR 2,50,000-00. Explanation to Section 51(1) provides that the value of supply shall be taken as the amount excluding the central tax, state Tax, Union territory tax, integrated tax and cess indicated in the invoice. Hence the limit of INR 2,50,000-00 shall be calculated excluding the tax indicated in the invoice. In this regard, the GST Council on 28.09.2018 has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed all elements of the invoice. In most cases, the customer will outline their terms of the transaction on a purchase order. Further, as per Rule 46(q) of the CGST Rules, 2017, Tax Invoice must be having a signature or digital signature / electronic signature of the supplier or his authorised representative. Accordingly, each invoice shall constitute as an individual contract. Therefore, from the documents / Tax invoices / purchase orders furnished by the applicant along with their application, it can be seen that the goods/ services are procured based in the purchase orders placed by Nirmithi Kendra to their suppliers and accordingly, as per the above explanation, goods / services are supplied as per the contract envisaged in the section 51 of the Act, and TDS provision is applicable to them. Further, when the value of supply exceeds the limit prescribed under the Act, Tax Invoice issued in the subject case shall be considered as contract and TDS is applicable. Similarly, when the value of total supply during the year exceeds the limit, tax invoice is considered as contract in the subject case and TDS is applicable. In this regard the authority has forwarded opinion r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction referred to as the deductor ), to deduct tax at the rate of one per cent, from the payment made or credited to the supplier (hereafter in this section referred to as the deductee ) of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees: Provided that no deduction shall be made if the location of the supplier and the place of supply is in a State or Union territory which is different from the State or, as the case may be, Union territory of registration of the recipient. Explanation.- For the purpose of deduction of tax specified above, the value of supply shall be taken as the amount excluding the central tax, State tax, integrated tax and cess indicated in the invoice. It is clear from the above; tax deduction shall be made by the specified persons if the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees. The issue whether the applicant is covered under the deductor is not a question before us and hence it is assumed that he is liable to deduct the tax. 9.2 The above section does not mention anything about the value of the invoice, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a wire, cable, pipeline or other conduit, and for which the supplier invoices the recipient on a regular or periodic basis and includes supply of such goods as the Government may, subject to such conditions, as it may, by notification, specify; Even here, it can be seen that the contract is important and this is what determines how much quantity needs to be supplied and when. The supply may be made on a continuous basis or recurrent basis, but what is supplied is a part of the original contract. In such cases, the multiple part supplies would be a single supply under the contract . 13. Going through the four scenarios presented by the applicant, the following phrase is noted in scenario no. 3 and 4: Procure goods and services on call off basis under the terms and conditions of the agreement of continuous supply We observe that the agreement of continuous supply is a contract for scenario no, 3 and 4 and if the amount involved in the supply in this contract exceeds ₹ 2.5 lakhs, then the applicant is supposed to deduct TDS on the payment credited to the vendor. 14. In the first scenario, since the value of the single invoice is more than ₹ 2.5 lakh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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