Para 4.15 — WORKS_MANUAL

4.15 Safe Custody and Monitoring of Securities A suitable mechanism for safe custody and monitoring of EMDs and performance securities and other instruments should be evolved and implemented by each ministry/ department. The ministries/ departments shall also make institutional arrangements for taking all necessary actions on time for extension or encashment or refund of EMDs and performance securities, as the case may be. Monitoring should also include a monthly review of all bank guarantees and other instruments expiring in next three months, along with a review of the progress of the corresponding contracts. Extension of bank guarantees and other instruments, where warranted, should be sought immediately and implemented within their validity period. Bank Guarantee should never be handed over to the contractor for propose of extension of validity. Such a system of monitoring of securities and other instruments may be considered to be computerised with automatic alerts about lapse of validity etc. For release of BGs, the proposal shall be forwarded by the executing agency with its recommendations in accordance with the contract conditions, for approval by the CA with the concurrence of the Finance Division.

4.16 Goods and Services Tax (GST) i) A detailed clause regarding GST may be included in the bid documents, in consultation with the Financial Advisor, stipulating inter-alia that all the bidders/ tenders should ensure that they are GST compliant and their quoted tax structure /rates are as per GST Law. While before enactment of GST, the bid prices were normally inclusive of applicable taxes, now after its enactment, as per the GST Act the bid and contract must show the GST Tax Rates and GST Amount explicitly and separate from the bid/ contract price (exclusive of GST). Asking for a bid-price inclusive of taxes/ GST would be a violation of the GST Act. Bid format may be suitably modified accordingly. In the transition period, any variation in tax structure/rate due to introduction of GST shall be dealt with under Statutory Variation Clause.

Ministries/ Departments may follow the procedure as mentioned below while dealing with contractor’s payment, post GST promulgation:

a) Works is treated as a ‘Service’. (- GST rate would vary depending on type of work). All works contracts are to be provided with Harmonized System of Nomenclature - HNS Code (actually Service Accounting Code SAC, being a service). The HNS code can be downloaded from the website www.cbec.gov.in. Works Contracts in general come under Chapter 99, Section 5, Heading 9954(Construction Services)as ‘Composite supply of Works contract as defined in clause40 119 of section 2 of CGST Act’.GST rate would be based on the type of contract. In case contract consists of both goods & service, then interpretation regarding nature of contract should be done as per clause41 8, Chapter III of CGST Act, 2017.

b) The ‘on account/ final contract certificate’ shall be prepared by the Ministry/ Department on the basis of quantity of work executed at the contracted rates, duly segregating the GST component as detailed in para

(iii) below.

c) Since before promulgation of GST, the contracted rates normally used to be inclusive of all taxes, the calculation of ‘Gross amount of work executed’, ‘Amount of work executed excluding GST amount’ and ‘GST amount’ in the ‘on account / final contract certificate’ may be done as under:

Let Z = Gross amount of work executed on the basis of quantum of work executed at the contracted rates. R = Percentage rate of GST for that HSN code Y = GST amount as per applicable GST rate for that HSN code. X - Amount of work executed excluding GST amount. Then, Z = X + Y;

40 (119) “works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract; 418. The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:—

(a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and

(b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.

4.17 Risks and Mitigations- Preparing Bid Documents, Publication, Receipt and Opening of Bids Risk Mitigation Exceptions to an open bidding process are abused, leading to single source processes. Rigorously follow the conditions under which open tendering can be dispensed with. When short lists are used, the process of preparation of short lists may be nontransparent and all eligible firms may not be included and some ineligible firms may get included. Enlistment of bidders/contractors: All major procuring departments must keep a list of enlisted bidders for use in restricted bidding. Publicise even restricted bids on your website. Bidders for LTE may be transparently selected with the approval of CA. Pre-qualification criteria: PQB has the potential of getting misused or being applied without considering the restrictive nature of competition. PQC should be relevant to the quality requirements and neither be very stringent nor very lax to restrict/facilitate the entry of bidders. These criteria should be clear, unambiguous, Lay down criteria when two stage bidding is warranted. Also lay down model PQC criteria for different types of procurements.

e) In case contractor is liable to be registered under GST Act, Ministry/ Department shall pay to the Contractor ‘Gross amount of work executed’ (i.e. “Z” as mentioned in para

(iii) above) duly deducting all other leviable taxes like I/Tax, labour cess, royalty etc. as applicable. Contractor shall be liable to pay ‘GST amount’ to respective authority himself. Whereas, Ministry/ Department shall deposit all other taxes deducted to concerned authority as is being done presently.

f) In case contractor is not liable to be registered under GST Act, contractor shall be paid “Amount of work executed excluding GST amount” (i.e. “X” as mentioned in para

(iii) above) duly deducting all other leviable taxes like I/Tax, labour cess, royalty etc. as applicable. Ministry/ Department shall deposit ‘GST amount’ as well as all other taxes deducted to concerned authority.

ii) Pre-GST contracts need to be viewed in the light of the clauses of the contracts already signed and provision for change in law.

Where Y = X*R/100 Thus from the known amount of Z, amounts of X and Y can be worked out. d) Once the ‘on account / final contract certificate’ is prepared by Ministry/ Department and communicated to contractor, the contractor shall submit invoice (bill) in a GST compliant format duly segregating the ‘Amount of work executed excluding GST amount’ and ‘GST amount’ (i.e. “X” & “Y” as mentioned in para

(iii) above) along with Invoice No. (Bill No.) and all other details required under GST act. In case any need arises to modify the Invoice (Bill) due to any reason, contractor shall submit amended fresh invoice for processing the payment.

exhaustive and yet specific. Also, there should be fair competition. Invitation to tender (an open bid) is not well publicised or gives insufficient time, thereby restricting the number of bidders that participate. Publicity and adequate time for bid submission must be ensured. Require a higher level approval for short bid submission period. Evaluation criteria are not set from the beginning or are not objective or not clearly stated in the bid documents, thereby making them prone to being abused. Objective, relevant and clearly stated evaluation criteria must be specified in the bid document.

Chapter 5: Evaluation of Bids and Award of Work 5.1 Evaluation of Bids 5.1.1 The evaluation of Bids is one of the most significant areas of purchase management and the process must be transparent. All tenders are to be evaluated strictly on the basis of the terms and conditions incorporated in the tender document and those stipulated by the tenderers in their tenders. The Contracting Authority may include quality, price, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, costeffectiveness, after-sales service and technical assistance, delivery date and delivery period or period of completion etc. No criteria shall be used for evaluation of tenders that cannot be verified or not stated in the contract, with the exception of provisions of laws in force. No hearsay information or hitherto undeclared condition should be brought in while evaluating the tenders. Similarly, no tender enquiry condition (especially the significant/ essential ones) should be overlooked/ relaxed while evaluating the tenders. The aim should be to ensure that no tenderer gets undue advantage at the cost of other tenderers and/ or at the cost of Procuring Entity. Information relating to evaluation of tenders and the Tender Committee’s (TC’s) deliberations should be confidential and not be shared with persons not officially connected with the process. The process of tender evaluation proceeds is described in the subsequent paras.