Application of the correct rate of tax on ongoing works contract services where there is a change in the rate of tax in respect of goods and services or both with reference to the recent change in the rate of tax from 12% to 18% w.e.f.18.07.2022 reg;
It is observed that many stakeholders especially work contract service supplier are expressing doubts about the correct application of the tax rate on ongoing works contract services due to the recent change in the rate of tax from 12% to 18% w.e.f. 18.07.2022.
Therefore, the matter was examined and it has been clarified that where there is a change in the rate of tax in respect of goods or services or both, the time of supply shall determine the correct rate of tax as mandated under section 14 of the NGST Act, 2017. Section 14 of the NGST Act, 2017 is briefly illustrated as under for general guidance and reference by all concerned;
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Sl. No. |
Where Goods or Services or both are Supplied |
Date of issue of Invoice |
Date of receipt of Payment |
Time of Supply (TOS) |
Applicable GST |
|
1 |
Before the change in rate of tax |
a. after the change in rate of tax- say 20.08.2022 |
after the change in rate of tax- say 25.08.2022 |
date of receipt of payment or the date of issue of invoice, whichever is earlier. Therefore, in this case, TOS will be 20.08.2022 |
18% |
|
b. prior to the change in rate of tax- say 16.07.2022 |
after the change in rate of tax- say 25.08.2022 |
date of issue of invoice. Therefore, in this case, TOS will be 16.07.2022 |
12% |
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c. after the change in rate of tax- say 20.08.2022 |
before the change in rate of tax- say 16.07.2022 |
date of receipt of payment Therefore, in this case, TOS will be 16.07.2022 |
12% |
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|
2 |
After the change in rate of tax |
a. prior to the change in rate of tax- say 16.07.2022 |
after the change in rate of tax- say 25.08.2022 |
date of receipt of payment. Therefore, in this case the TOS will be 25.08.2022 |
18% |
|
b. before the change in rate of tax- say 16.07.2022 |
before the change in rate of tax- say 17.07.2022
|
date of receipt of payment or date of issue of invoice, whichever is earlier. Therefore, in this case, the TOS will be 16.07.2022 |
12% |
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c. after the change in rate of tax- say 20.08.2022 |
before the change in rate of tax- say 16.07.2022 |
date of issue of invoice. Therefore, in this case, the TOS will be 20.08.2022 |
18% |
Note: “the date of receipt of payment” shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment is credited to his bank account, whichever is earlier.