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Billing upon succesful Commissioning after 1/4/2015

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Billing upon succesful Commissioning after 1/4/2015

Post by Evon on Thu Mar 19, 2015 4:39 pm

Hi,

We have invoice customer for goods delivered on Dec 2014 for 95% and revenue recognised in P&L up to 95% only.
The payment term is the balance of 5% can only bill to customer upon successful commissioning.
Now, we are going to bill the balance 5% to customer after 1/4/2015 as the commissioning scheduled after 1/4/2015.
Are this balance 5% billing subject to GST? The goods has been fully delivered on Dec 2014.

Evon

Posts : 27
Join date : 2015-03-13

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Re: Billing upon succesful Commissioning after 1/4/2015

Post by joseph on Thu Mar 19, 2015 5:13 pm

The Act only mentioned about delivery of goods. I believe for a delivery to be complete, absolute possession must pass.

Does the customer have absolute possession of the the goods? What happen if the goods is stolen or destroyed or burnt down now? Who has to bear it? The seller or the buyer?

Is there a separate charge for the commissioning work?

_________________


DISCLAIMER:
Any opinion expressed is strictly my personal view based on my understanding and interpretation of the GST Act 2014, Regulations, Orders, DG's Panel Decisions and Customs' Guides. You should seek advice from experts and/or the Customs Dept if the subject matter is significant to your business.

joseph

Posts : 277
Join date : 2014-09-25

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Re: Billing upon succesful Commissioning after 1/4/2015

Post by Evon on Thu Mar 19, 2015 5:27 pm

Hi,

The customer has absolute possession of the goods after delivery on Dec 2014. The goods is in their warehouse or plant and just pending for commissioning upon their request.
Just in our industry practice , we only can bill them max 95% as the the equipment need to be commissioning.
There is no separate charge for the commissioning work. We quote to them in one lump sum inclusive of commissioning work.

Evon

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Join date : 2015-03-13

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Re: Billing upon succesful Commissioning after 1/4/2015

Post by joseph on Thu Mar 19, 2015 5:53 pm

The balance 5% seems like a retention sum.

Section 194 of the GST Act 2014 on Retention payments:
Where any contract for the supply of goods or services before the effective date provides for the retention of any part of the consideration by a person pending full and satisfactory performance of the contract, or any part of it, by the supplier, the retention payment in respect of any supply made on or after the effective date shall be chargeable to tax.

_________________


DISCLAIMER:
Any opinion expressed is strictly my personal view based on my understanding and interpretation of the GST Act 2014, Regulations, Orders, DG's Panel Decisions and Customs' Guides. You should seek advice from experts and/or the Customs Dept if the subject matter is significant to your business.

joseph

Posts : 277
Join date : 2014-09-25

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Re: Billing upon succesful Commissioning after 1/4/2015

Post by Evon on Fri Mar 20, 2015 3:52 pm


The supply of goods in this case is referring to delivery of goods which is performed in Dec 2014, does this mean that it is in respect of supply before the effective date and not subject to GST?

Evon

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Re: Billing upon succesful Commissioning after 1/4/2015

Post by joseph on Fri Mar 20, 2015 4:13 pm

95% not subject to GST, balance 5% retention payment subject to GST.

The commissioning work done post-GST is to ensure full and satisfactory performance of the contract.

_________________


DISCLAIMER:
Any opinion expressed is strictly my personal view based on my understanding and interpretation of the GST Act 2014, Regulations, Orders, DG's Panel Decisions and Customs' Guides. You should seek advice from experts and/or the Customs Dept if the subject matter is significant to your business.

joseph

Posts : 277
Join date : 2014-09-25

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Re: Billing upon succesful Commissioning after 1/4/2015

Post by Evon on Fri Mar 20, 2015 4:36 pm

If the supply of goods and commissioning work completed before the effective date i.e in Dec 2014 and 100% billing to customer, but 5% retention sum being withhold by customer for one year from the date of successful commissioning. This is payment term under the contract .Is this 5% retention sum subject to GST when it is due for payment after one year?

Evon

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Re: Billing upon succesful Commissioning after 1/4/2015

Post by joseph on Fri Mar 20, 2015 4:48 pm

As long as you have billed your customer the full amount pre-GST, the 5% withheld as payment should not attract GST.

_________________


DISCLAIMER:
Any opinion expressed is strictly my personal view based on my understanding and interpretation of the GST Act 2014, Regulations, Orders, DG's Panel Decisions and Customs' Guides. You should seek advice from experts and/or the Customs Dept if the subject matter is significant to your business.

joseph

Posts : 277
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