A UAE company required support in participating in a bid for a construction project in India.

We first provided a detailed input and output tax cost analysis for the client. We assisted them in identifying various procurement and supply options/scenarios and preparing the tax cost sheets to ascertain the most tax efficient option.

We also suggested a few terms to structure the transactions in order to optimiseindirect taxes on Engineering Procurement Construction (EPC) contracts.

Furthermore, we delivered a contractual classification note with treatment of the same as a works contract.

The assignment was planned and structured in the following way:

Preparatory work

• Analysis of the activities to be undertaken by the company
• Noting the laws applicable to the client for carrying out this project and drawing suitable assumptions to kick-start the process

Compiling information and detailed analysis:

We prepared the tax cost sheets taking into consideration key factors such as identifying the nature of procurements made for the following EPCcontracts:

• Inter-state Procurements
• Local Procurements
• Imports

We highlighted the tax impact on the company taking into consideration the nature of procurements done and estimating the total eligible credit available to the company. We also analysedthe applicability and eligibility of the company for credit if the service or part of the service delivered is outsourced to sub-contractors.

Another crucial task was to determine the applicability of a works contract on the business activities as a whole and evaluating the best possible option for valuation for the purpose of taxability, which would result in the least net output tax liability.

Furthermore, a total of six feasible options were suggested along with their respective ranks on the basis of the least net output tax payable considering all permutations available for valuation (for e.g. valuation as per composition scheme under State VAT and on an actual basis under service tax, valuation as per composition scheme under State VAT and on an ad-hoc basis under service tax, etc.) as per the legislative provisions prescribed under the State VAT and service tax laws.

A similar evaluation was done taking the Laws of the GST Act into consideration incase the project would have to be undertaken by the company after the implementation of the GST Law.

Nexdigm (SKP) provided a detailed input and output tax cost analysis for the client. We assisted them in identifying various procurement and supply options/scenarios and preparing the tax cost sheets to ascertain the most tax efficient option. We also suggested a few terms to structure the transactions in order to optimize indirect taxes on Engineering Procurement Construction (EPC) contracts.

The client successfully implemented the best option, after a comparative analysis of seven options provided by Nexdigm (SKP) for its company, which entailed savings in bidding cost. This facilitated the company to place a competitive bid for the construction project.