Avoiding contractual disputes arising out of GST

By Sudipta Bhattacharjee and Kanupriya Bhargava, Advaita Legal
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The first part of this article, published in the May edition of this journal, highlighted instances of contractual disputes arising out of goods and services tax (GST) due to differences in the interpretation of tax clauses or tax treatment in a contract between parties to a contract. This article encapsulates contractual best practices to reduce the chances of such disputes and litigations and arbitrations.

GST
Sudipta Bhattacharjee
Partner
Advaita Legal

Parties should ensure that contracts contain lucid, mutually agreeable and comprehensive answers to the following questions, to avoid future disputes pertaining to tax:

    • Which taxes are to be borne by each party? If the contract price is to include all taxes, does it also include taxes that are statutorily payable by the customer? For example, would customs duty or GST paid on a reverse charge basis by a customer be deducted from future payments to be made to the contractor? If yes, that should be clearly specified along with the necessary method.
    • For taxes/cesses such as building or labour cess, which can be the statutory liability of either the customer or the contractor depending on various factors, who bears the responsibility under the contract?

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Sudipta Bhattacharjee is a partner and Kanupriya Bhargava is a principal at Advaita Legal.

GST

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