we Taagieaders aredkert fies ame gait | Rural Electrification Corporation Limited REG] See ee NoRECPMo/GsT/t@-10/-2) | Date 19.06.2018 ‘AL Project mplementng Agencies DOUBLY Projects Shoei oar Sir Madam, “This isin rorenco tothe DOUGLY Scheme for the various ongding works under taken by the. Implementing Agencies by incuring eaptal expenditures for sating up addkonal dstrbuion network | electiication et. with grants sanctioned by the Minty of Power (trough REC as a nodal agency forthe captal cost and Gertral Taxes charged thereon but ‘excluding state levies taxes. Pursuant to implementation of GST wo. 1* July, 2017, vaious apprehensions have been ‘raised about ae mpact onthe contract's valuo of such works. In-hie raged, we understand that your Organisation would have ented Ino various contacts under the pre-CS regime for consucton of such captal asses; the wok for which would underway as on tly 2017 (ho eto of plementation of GST inn), ‘As you would be aware, ndect tax0s (rsuding the conta axa) in nia had witnessed @ mar retorm by subeuming mos ofthe Indect taxes suchas Exese dy, CST, Service tax VAT, enty tax ot in GST, resuling in increased aval of cra, removal of cascading ‘fect, reduction in rates of tax. reduction in compance cost an thus impacting the base’ preo of Goods and Services, which needs to be oramined. i detal By the Implementing agencies. In order to better conceptualize the above, we have provided some sample fnancial ‘Snulatons for varous ypes of supptes, co a oindleate a posable mpact by inraduction ‘fGST which can be seen inthe Annexure. However, please ot thatthe sald franca ‘Smulatons are only indcalve and would depend largely on te supply chain stucur Droporion of cferent mazerals and negotatione by the ContactrlManufactures wih tee Subcontaciors\vendors. While these simulations are ilusratve and provide a broad level overview ofthe impact Lunde speciic scenarios and assumptions, to dtormine and understand the Impact ofthe fatove, typeally each Organisation would need to evakiate te impact on transtion contracts {.e, contacts which have ben executed prior to 1" July 2017 But euppy for which ‘would be executod in part o fll under the GST regime) forthe Tofowing + Incase of tax inclusive contracts, the implementing Agencies would need ta very at to whether they are contractual abo’ to'remburse any eddtonal taxes 10 he = a Kal, Marta Parea & Lckrom Region and ‘Senpat, Bhopal Shubanatwar, Chena, Gamal pr Jame, Pa, Rane, Sing, Sins, State Thrwananthaparan & Vadose “raiing Centre: Canal ae fr Rus Elcieaon (IRE), Hydrabod+ Incase of tax exclusive contracts, the Companios would reed to very whether ts rate of OST would apply otha agroed inthe corvact eet + Whether any efficiency in form of more tax ered, ower tox duo to thor tax rates oe reducing tax cascading have acetved to the ContracorManutactuo wich should be feed on by them by way of commensurata duction in base price of Goods/Sences, basis the AntLProfiteerng clause coriompatod under te GST regime. The said afiioncies typically boing on account ofthe folowing Reduction in taxes forthe supoy made by the Contractor the DISCOMS ~ duction inthe base price of tho Contractor on account ct increased credits! ‘decontinuation of certain tes wien wore eater a cost the Convactor — Reduction in prices charged by the sub-conractorsvendors to the ContractorManulactires on acsount of ncteased credits ciscontinuaton of certain taxes which wore ear a costo the Sub-corracorencors Wie the Contractors/Manulactures may have been demending edtonal taxes, despite the fact that much ofthis concern has aoady boon resolved as mest ofthe goods, quire for ‘ecteaien works undor DDUGIY Scheme, 1s now atacing GST @ 18% istead 28% {Used to levy atthe time of inroducton of GST), Ii imperative for the DISCOMS's Implementing Agencies to vey whother the addtional taxes © contractually payable oF ‘ot as wal a very as to wher possible efelences or roducton in pies recoverable, fave actly beon claned tam the ContractoraManutactres, “To assure that the above sues are wel taken care of, the DISCOMS / implementing ‘Agencies would need 1 evaluate the ntransiion cerracts to sndersand the contractual faites, held dscussione! semars wih tho ConractorsMenufactures 10 explain the possible efclencies and request them to pase on benefits which would have accrued on ecaunt of Inteduction of GST, adopt @ mathodaogy to ensure appropriat stops having been taken for recovering bens kam ‘ContactorsManutacures on account of GST, {elormine the actual GST payable on each ofthe contacts, ot Given aur belt thatthe Benet accruing to ether of us on account of increased cred ‘Should be passed on by al of us tothe ultimate customer, bolo thal necesoary stops ‘Should be faken by al CISCOMS's to anare that aspoc discustod above are looked into, Furter ta dain th ove rot eal as we a pose way far tp, 2 ane 11 $ July 2018 st SCOPE convention ‘Cente, SCOPE een ath Rose. Now Deli where we coud jy eter understand your on- ‘found experience, aeites, way forward onthe nears contact, ete. In ight of above tis requested to nominate concemed Oricers for above seminar {nd also, t would be appreciated, I you could share a document capturing Issues {faved by DISCOM on account of niosucton of GST beforehand (GS. BHATI) 4 fxoitve reer) I‘Annexure simulations for GST impact on DDUGJY Works: ‘+ For Direc transactions’ those supplied directly by the manufacturers to DISCOMS: Amount (INF ‘Cost of raw material excluding tx assuming a _sdbvendorlvelecincy under GST) Excise duty (ED) GST on raw material (bath being | 5.00 706 ‘rodtable and hence, not aod tothe cos) ‘CST on purchare of rw maior (he same vase | 0.90 coat tothe Contractor under the GST regime) ‘Gost of raw material to the Contractor 80 | 380 ‘Goat of aerial sawvices ooo | V0.0 ‘Seno taxon such input services GST (bathbsing | 140 730 credtable and hence, nat addod tothe cot) ‘SBC and KKC on such input sencos (assuring 010 KC cred is not avaliable) | Cost of input services (including SBC andKKE 10:70 | 1000 ot) ‘Gost of labour 2000 | 20.00 ‘Contractors margin (assuming 15% of cost and | 1065 1065 ‘the same remaining Constantin trms of magnitude) ‘Base price forthe supply by Contractor to ares | 7885 Discoms: Excise duty on det procuremenis/ GST@ Tex | ToaT | 1487 ‘VAT on direct procurements (where an ea-daio | 13.32 supply s made) Cost to DISCOS Tos ie | 9422 Basle the above, the ttl pice (where incushve of tx) could wines a decrease by way of inroduction of GST. However, the same could ag wol increase where there is not much fub-vendor fvelefeoncy to be passed an anaior the Contactor makes an Interstate ‘Supply othe DISCOMS.