GST- Works Contract and overlapping transactions

Overview Works Contract Restaurant Right to Use Overlapping transactions including ISD

Works Contract

How its taxed currently? Why its taxed this way? Works contract What is it? How its taxed currently? Why its taxed this way? In GST, how taxation will be? Issues Impact

Works contract Goods Services Works contract

Timeline Prior to 1982 After 46th Amendment

Why taxed in such way? Deemed sale = Sale - 366 (29A) A tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; Deemed sale = Sale -

How its taxed in current regime? Works contract Goods value VAT State VAT Act Service value Service Tax Finance Act, 1994

Schemes Actual basis VAT Composition ST

Issues Goods incidental or services incidental? Dominant intention? Different definitions in ST and VAT laws Different treatments (TDS, RCM etc) Separate rates and composition schemes

GST regime - issues Section 8 GST to apply on supply of goods and/or services

GST regime - issues Schedule II – 5. The following shall be treated as “supply of service” (f) Works contract including transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract ‘Works contract’ is defined (110) “works contract” means a contract wherein transfer of property in goods is involved in the execution of such contract and includes contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property

No separate provisions for rate, value, ToS, PoS etc Transaction Goods Deemed/ declared Services Both No separate provisions for rate, value, ToS, PoS etc

GST regime - issues Repair of car Job work Composite supply Job work” means undertaking any treatment or process by a person on goods belonging to another registered taxable person Composite supply TV with transportation Whether dominant intention can resurface as rates could be different?

Impact Revisit contracts Which tax to pay and how? Restructuring could be required Composition scheme Rates Effective tax rates may go up/ down Rule 6 of CCR Transitional Transitional provisions to be revisited

Restaurants

How its taxed currently? Why its taxed this way? Restaurant What is it? How its taxed currently? Why its taxed this way? In GST, how taxation will be? Issues Impact

Restaurant Goods Services Restaurant

How its taxed in current regime? Restaurant A/c VAT Service Tax Non-a/c

State-wise different rates Issues State-wise different rates Home delivery of food Credits

Why taxed in such way? 366 (29A) A tax on the 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, where such supply or service, is for cash, deferred payment or other valuable consideration Deemed sale = Sale -

GST regime It’s a ‘service’ 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 ‘Restaurant’ is not defined A/c Non-a/c

Impact Rates Effective tax rates may go up/ down Rule 6 of CCR Transitional Transitional provisions to be revisited

Right to use

Right to use What is it? Issues Impact Why its taxed this way? How its taxed currently? Why its taxed this way? In GST, how taxation will be? Issues Impact

RighT to use Possession Control Right to use

How its taxed in current regime? Right to use Both, possession and control transferred VAT In all other cases Service Tax

Whether possession and control transferred? Issues Whether possession and control transferred? Dominant intention? ST or VAT?

Why taxed in such way? 366 (29A) A tax on transfer of  right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration Deemed sale = Sale -

GST regime It’s a ‘service’ ‘Right to use’ is not defined A 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 ‘Right to use’ is not defined What is right to use? What if right to use is not transferred?

Impact Revisit contracts Restructuring could be required Rates Effective tax rates may go up/ down Transitional Transitional provisions to be revisited

Overlapping issues

Overlapping issues Software Intangibles (Including franchisee rights) Real Estate Input Service Distributor

Thank you … For any Clarification, Please Contact Indirect Taxes Committee of ICAI Email: idtc@icai.in ; Website: www.idtc.icai.org or https://www.youtube.com/indirecttaxcommittee CA Pritam Mahure