Explore the complications faced by contractors under GST, including billing delays, reconciling income tax and GST figures, and proposed solutions for smoother operations.
During 2017 while GST implemented contractor was included under the service segment and charged GST @ 18%. However, in the case of contract work executed to Government and Government undertakings applicable rate was 12%, subsequently during 2022 this rate enhanced to 18% as per Notification 25/2021. Normally for contractors executing work at Government site they can issue only part bill or running account bill. After the introduction of GST contractors are supposed to issue tax invoice with applicable rate of tax. Here in practice Government project team or inspectors physically making an inspection for the complete work and taking measurement to their ‘M’ book. Based on this measurement book only they will make the final approved bill. In several; situations after the completion of a part work measurement and final amount can be arrived by the Government Officer after five or six months. As per GST Law Rule 47 once a service is completed within a period of 30 days contractors are supposed to issue or generate the tax invoice. But in the case of work executed with Government/Government authorities, this is not being implemented in time. In the case of Water Authorities undertakings they are making the measurement and final amount will be uploaded in the portal after that only contractors can come to know the exact value of such bill. In this situations after transferring the net amount to the Bank after that contractor will come to know how to generate the tax invoice.
Subsequently, in the GSTR portal contractors are filing on the assumption of these amount is on cum tax concept. However, while filing Income Tax Return in the Form 26AS, AIR etc., disclose a different figure. The reason is that gross amount will be declared in 26AS and net amount is disclosed in the GST Return. For eg: A contractor is issuing an invoice for Rs. one lakh including GST but the officer after making the inspection and recovery of TDS under Income Tax and GST net amount Rs.90,000/- is got approved and transfer to the bank account. Therefore in order to avoid these chaos and confusions I am forwarding the following two proposals to overcome and rectify the above complex matter.
1. Government contractor has to issue the tax invoice to the awarder/Government authorities within 30 days after the completion of a work.
2. Government authorities subsequently making a physical verification and any difference in amount if any it may be communicated to the contractor. Here if there is any such verification contractor has to issue a debit or credit note accordingly and the same is to be up-loaded in the GST portal to reconcile the final amount.
If the above two conditions are comply with contractor and Government in respect of billing and accounting concept vis a vis at the time of filing Income Tax Return declaring the correct turnover which will match with GST & Income Tax records. However, Government also has to accept these changes in the new digital world and make the necessary arrangements as stated above. The old and obsolete concept of preparing the invoice by the Government has to be dropped. In short the accounting procedure and latest developments under GST and Income Tax Laws to be strictly complied with the contractor and which is also binding on the Government authorities. I hope this relevant changes in the field of taxation is to be adopted uniformly by the contractors and Government authorities.
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