Govt passes memorandum; prices of goods and services supplied to govt likely to change
PANAJI
The state government has passed a memorandum which explains how the bills of supply of goods and services to government departments will be adjusted in the new Goods-and-Services-Tax (GST) regime.
The need of this arose because GST absorbed a number of taxes from earlier regime. For example, excise duty, service tax and value-added-tax (VAT) have been absorbed by GST. Due to this, prices of goods and services being supplied to government departments may change.
As per the memorandum, if supplier of goods and services to government department stands to benefit in terms of lesser cost in GST regime, then he has to pass on the benefit of the same to the state government.
Similarly, if the cost to supplier has increased in GST regime, then the state government will pay for the additional cost. The biggest difference under GST regime compared to earlier is the provision of input-tax-credit (ITC).
Under this, a supplier to the state government can get his tax liability reduced to the extent taxes were paid by his suppliers. This can result in reduction in cost of a product to the supplier because in earlier tax regime, there was no provision of ITC. Therefore, the bill to the state government should get reduced to the extent ITC availed by the supplier.
There are broadly three categories of suppliers to government departments. The first category is of pure services like labour contracts and etc. on which earlier service tax was levied. In such cases, the claim of supplier will be reduced by service tax amount and later increased by GST.
The second category is of services, which also include supply of materials. These typically include housekeeping contracts and operation and maintenance services. In case materials are also involved, the supplier can avail ITC. His claim will be reduced by ITC.
The third category is of supply of goods and of contracts involving purely supply of materials. This category is further divided into three sub-categories. The first sub-category is of supply of imported material. Earlier imported products used to attract countervailing duty and/or special additional duty. The bills will be reduced to the extent of countervailing duty and/or special additional duty and increased by GST.
The second sub-category is of supply of materials procured directly from manufacturer to a government department. Earlier, excise duty, VAT or central sales tax (CST) used to be levied on such materials. These taxes shall be reduced and GST will be calculated to levy it on the bill amount.
The third sub-category is of supply of materials procured from a supplier/trader (other than a manufacturer). Earlier, excise duty, CST and VAT were applicable, which now have to be reduced. The GST liability has to be calculated to levy on the bill amount.
