Dear Sir,
My company (xyz) was awarded a work contract by PWD prior to GST ( Dec 2016) and this work was completely subleted by me to a Sub-Contractor (abc) with condition that VAT is his liability. In Oct 2017 the bill was paid by the PWD for say Rs. 10 lakh, which consist of 50% work done before GST i.e. before 1st july whose bill were made but payment pending and 50% work done after GST. I have shown this 50% work done before GST in my VAT returns already. I have to make a gross payment of this Rs. 10 lakh to the contractor,
1. How much GST should i deduct while making payment. ( The GST for work contract is 12% but for sublet is probably 18%, i am not sure though)
2. Should I deduct GST only on work executed after 1st July or on whole amount.
3. My agreement with subcontractor was for 5% Commission during VAT regime with a condition that it will stay as 5% Inspite of change in any tax law. But due to this anomaly of 12% gst for primary contractor and 18% gst for sublet, the effective taxation comes out to be 10-12% after claiming input tax. Now the sub-contractor is claiming losses. How should I know if he is indeed suffering from loss due to this tax anamoly. or my understanding of two tax structure is incorrect.
Please provide your valuable guidance.
CAclubindia
