The goods and services tax (GST) regime has brought significant changes in indirect taxation in India. One key aspect is the tax treatment of ongoing contracts during the transition period. In this context, an advance ruling application was filed by infrastructure company M/s Jaiprakash Associates Limited to clarify issues related to time of supply and invoice issuance for additional payment received due to post-GST price revision of a pre-GST contract. The ruling provides clarity on the applicable provisions under Section 142(2)(a) of CGST Act. This article summarizes the key facts, questions raised, findings and advance ruling for the benefit of taxpayers in similar situations.
Background
M/s Jaiprakash Associates Limited, a works contractor executing works for the State Government of Andhra Pradesh, has filed an application under Section 97(1) of TGST Act, 2017 read with Rule 104 of CGST/TGST Rules. The provisions of CGST Act and TGST Act are largely the same except for certain provisions. For this Advance Ruling, the term ‘GST Act’ refers to both CGST and TGST Acts. The queries raised by the applicant fall under Section 97 of the GST Act. The required fees have been paid and the application has been admitted as per Section 98(2) of TGST Act, 2017.
Facts of the Case
i) On 25 August 2005, the Irrigation and CAD Department of the Government of Andhra Pradesh awarded M/s Jaiprakash Associates the work for execution of Tunnel 1 and 2 of the Srisailam Left Bank Canal Tunnel Scheme.
ii) The project site is located in the Amarabad Reserved Forest and Tiger Sanctuary. The agreement prescribed the use of Tunnel Boring Machines.
iii) Work commenced in June 2008 from the exit portal and in June 2011 from the inlet portal. The work is still ongoing.
iv) Due to MoEF restrictions, planning was based on limited data from the Department. During execution, the actual strata properties varied from the planning data.
v) This resulted in lower progress, higher consumption of spares, consumables, power etc. M/s Jaiprakash Associates requested the Government to revise the rates.
vi) The Government agreed to revise the rates for the changed site conditions beyond the original agreement period based on observed data.
vii) The Government approved revised rates for excavation and concrete lining of Tunnel 1, applicable from September 2010 onwards, after deducting earlier benefits.
viii) M/s Jaiprakash Associates has now submitted bill for the differential amount as per revised rates for work done from September 2010 to June 2017.
ix) They need to issue a GST tax invoice for this amount.
Questions Raised by Jaiprakash Associates Limited
i) What is the time of supply of the work executed from September 2010 to June 2017?
ii) How to issue the tax invoice in this scenario?
Personal Hearing
During personal hearing, M/s Jaiprakash Associates reiterated the facts and contentions submitted in the application. They confirmed that this case is not pending in any other proceedings. Their attention was drawn to Section 142(2)(a) of CGST Act regarding deemed supply for price revisions of pre-GST contracts.
Findings
As per Section 142(2)(a) of CGST Act, any upward price revision for a pre-GST contract is deemed to be a supply under GST.
i) The time of supply is the date on which the consideration for the price revision is received, as per Section 13(c)(a) of CGST Act.
ii) M/s Jaiprakash Associates has to issue a supplementary invoice/debit note within 30 days of the price revision, which will be considered a deemed supply under GST.
Ruling by AAR Telangana GST
i) The time of supply is the date on which the consideration for the price revision is received.
ii) M/s Jaiprakash Associates has to issue a supplementary invoice/debit note within 30 days of the price revision, which will be considered a deemed supply under GST.
Conclusion
In summary, this advance ruling has clarified the time of supply and invoice issuance procedure for receipt of consideration from post-GST price revision of pre-GST contracts. It upholds the deeming provision under Section 142(2)(a) of CGST Act. Taxpayers with similar cases of price revisions for pre-GST contracts can take note of this ruling while discharging GST compliance. Proper adherence to the time of supply and invoice rules is vital. This ruling sets a precedent for smooth transition of ongoing contracts under GST in line with the objectives of the landmark tax reform.
AAR Telangana GST Order Dated 30/09/2023: Advance Ruling Clarifies GST Provisions for Price Revision of Pre-GST Contracts (Jaiprakash Associates Limited)