{"id":22782,"date":"2020-12-24T14:43:07","date_gmt":"2020-12-24T09:13:07","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=22782"},"modified":"2020-12-24T14:43:09","modified_gmt":"2020-12-24T09:13:09","slug":"after-gst-implementation-there-can-be-a-change-in-contract-price","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/after-gst-implementation-there-can-be-a-change-in-contract-price\/","title":{"rendered":"Understanding Cases on Change in Contract Price after GST Implementation"},"content":{"rendered":"\n<p class=\"has-drop-cap\">GST was implemented from 1st July 2017, but there are still\nmany topics that need further clarification. One of the common phenomena in any\nbusiness is the change in a contract price. The change can be a result of any\nescalation clause inserted in any contact. A few common reasons for the change\nin contract price under GST can be changed according to prices of input\nmaterials or input services or any other change in contract price of the market\nsituation.<\/p>\n\n\n\n<p>The change in contract price after the implementation of GST is provided under the provisions of <strong><em>Section 142, Sub-section 2 of Central Goods and Service Tax Act, 2017<\/em><\/strong>. The section deals with miscellaneous provisions regarding the transition from the very old laws to new <a href=\"https:\/\/corpbiz.io\/gst-registration\"><strong>Goods and Services Tax<\/strong><\/a>. <\/p>\n\n\n\n<p>For understanding the implications of it, we know that such change can either result in an increase in the contract price or a decrease in contract price. The treatments of such increase or decrease or change in contract price are provided in Clause (a) &amp; (b) of Sub-section 2 of Section 142.  <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/after-gst-implementation-there-can-be-a-change-in-contract-price\/#Change_in_Contract_Price_by_Fulfilling_the_Underlined_Conditions\" >Change in Contract Price by Fulfilling the Underlined Conditions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/after-gst-implementation-there-can-be-a-change-in-contract-price\/#Contract_Price_when_Revised_Upward\" >Contract Price when Revised Upward<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/after-gst-implementation-there-can-be-a-change-in-contract-price\/#Contract_Price_when_Revised_Downward\" >Contract Price when Revised Downward<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/after-gst-implementation-there-can-be-a-change-in-contract-price\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Change_in_Contract_Price_by_Fulfilling_the_Underlined_Conditions\"><\/span>Change in Contract Price by Fulfilling the Underlined Conditions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/Change-in-Contract-Price-by-Fulfilling-the-Underlined-Conditions.png\" alt=\"Change in Contract Price by Fulfilling the Underlined Conditions\" class=\"wp-image-22783\" width=\"535\" height=\"445\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/Change-in-Contract-Price-by-Fulfilling-the-Underlined-Conditions.png 1000w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/Change-in-Contract-Price-by-Fulfilling-the-Underlined-Conditions-300x250.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/Change-in-Contract-Price-by-Fulfilling-the-Underlined-Conditions-768x639.png 768w\" sizes=\"(max-width: 535px) 100vw, 535px\" \/><\/figure><\/div>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/migration-to-the-new-tax-structure-under-gst-transition-process\/\">The Migration to the New Tax Structure under GST Transition Process<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Contract_Price_when_Revised_Upward\"><\/span>Contract Price when Revised Upward<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>If there is a change in contract price is in an upward\ndirection on or after implementation of GST, then the taxpayer who has removed\nor provided the goods or services or both will require issuing either the\nsupplementary invoice or the debit note for such an increased amount of\ncontract price. <\/p>\n\n\n\n<p>The supplementary invoice or debit note must contain all\nsuch particulars as may be prescribed. It has to be issued within 30 days from\nthe date of that revision\/change in contract price. The supplementary invoice\nor debit note is deemed to be issued under GST law against their outward\nsupply.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Understanding with an Example<\/h3>\n\n\n\n<p>Mr. A entered into the contract with Mr. B for selling goods\nworth Rs.50, 000 on 21st June 2017. Later on the 14th July, he revised the\ncontract price to Rs.70, 000. In this given situation, the contract price was\nrevised after an implementation of GST, which was on 1st July 2017. Hence, Mr.\nA will issue a supplementary invoice or debit note for such an increased amount\nof Rs.20, 000 (70,000-50,000). The supplementary invoice or debit note is to be\nissued within a month of such revision<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Tax Implication in the Above Case<\/h4>\n\n\n\n<p>In the above case, the tax implication shall depend on the two\nfactors:<\/p>\n\n\n\n<ul><li><strong><em>If payment has been made before an\nimplementation of GST<\/em><\/strong><\/li><\/ul>\n\n\n\n<p>If payment is already received before GST\nimplementation by Mr. A, then he had to deposited the tax applicable on the\nsame. The GST will only apply to an additional cost of the contract, i.e. Rs.20,\n000.<\/p>\n\n\n\n<ul><li><strong><em>If payment has NOT been made before an Implementation\nof GST<\/em><\/strong><\/li><\/ul>\n\n\n\n<p>In this case, when a payment was not received\nbefore an implementation of GST by Mr. A, then he does not have to deposit the\ntax applicable, the GST will apply on an additional entire revised cost of the\ncontract, i.e., Rs.70, 000.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Contract_Price_when_Revised_Downward\"><\/span>Contract Price when Revised Downward<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>If there is a change in contract price is in a downward\ndirection on or after the date of an implementation of GST, the following\nprovisions apply the taxpayer who has removed or provided goods or services or\nboth will be required to issue the credit note for such an increased amount of\ncontract price. <\/p>\n\n\n\n<p>The credit note must contain all such particulars as may be\nprescribed. It has to be issued within 30 days from a date of such change in\nthe contract price. The credit note is deemed to be issued under GST law\nagainst the outward supply made by them.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Understanding with an Example<\/h3>\n\n\n\n<p>Mr. A entered into the contract with Mr. B to sell goods\nworth Rs.50000 on 21th June 2017. Later, on 14th July, he revised the contract\nprice to Rs.30000. In the present situation contract price was revised after an\nimplementation of GST on 1st July 2017. Hence, Mr. A must required to issue the\ncredit note for the decreased amount of Rs.20 000 (30,000-50,000). <\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Tax implication in the Given Case<\/h4>\n\n\n\n<p>In the above case the tax implication shall depend on two\nfactors:-<\/p>\n\n\n\n<ul><li><strong><em>If taxes have been paid According to Old\nLaws<\/em><\/strong><\/li><\/ul>\n\n\n\n<p>In this case, when a payment is already received before the implementation of GST by Mr. A, then he had deposited the tax applicable on the same, he can revise his tax return and claim <em><strong>tax refund<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Tax_refund\"><em><strong>[1]<\/strong><\/em><\/a><\/sup> paid on reduced contract price. The Mr. B will also be required to revert the ITC claimed on such tax paid if carried forward under GST.<\/p>\n\n\n\n<ul><li><strong><em>If taxes have NOT been paid according to Old\nLaws<\/em><\/strong><\/li><\/ul>\n\n\n\n<p>In this case, where the payment was not received\nbefore an implementation of GST by Mr. A, then he had not deposited the tax\napplicable on the same. Mr. A can only reduce his tax liability if Mr. B lets\ngo of his ITC by the same amount.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In an ongoing business, while dealing with contracts, the change in contract price is highly common. After the GST implementation, many are worried about how it will impact the price revision. One is advised to go through the government GST website for more info and more clarity on GST related laws.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/implementation-of-gst-in-place-of-vat-in-indian-economy\/\">Implementation of GST in place of VAT in Indian Economy<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>GST was implemented from 1st July 2017, but there are still many topics that need further clarification. One of the common phenomena in any business is the change in a contract price. The change can be a result of any escalation clause inserted in any contact. A few common reasons for the change in contract [&hellip;]<\/p>\n","protected":false},"author":10,"featured_media":22784,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[16],"tags":[1357],"acf":{"service_id":"96"},"authorName":"Soumya Bajpai","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/01\/0.jpg","authorDescription":"Soumya has done LLB (Hons) and has a 2+years experience in writing. Her main interest is in reading judgments, new enactments and amendments taking around in law. She always strives to bring the best to work that she does.","postViews":4375,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/22782"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=22782"}],"version-history":[{"count":3,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/22782\/revisions"}],"predecessor-version":[{"id":22789,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/22782\/revisions\/22789"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/22784"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=22782"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=22782"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=22782"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}