Goods And Service Tax India

The reaction of the firm of Chartered Accountants that signed the accounts of Satyam Computers was aired by CNBC TV18 channel around 7.30pm on 7th Jan 2009.

It is extremely saddening to hear that they refused to comment on the issue taking plea of client confidentiality.

Satyam is a public limited company with wide spread shareholding. A large number of individuals, employees, mutual funds, pension funds from across the globe are shareholders. And it is to these shareholders that the Auditors submit their reports.

The letter written by Mr Ramalinga Raju, the promoter of Satyam Computer Services Ltd, admitting to window dressing of the Profit and Loss Account and Balance Sheet of Satyam Computers has sent shockwaves across the country.

How is it possible for a business house managed by a Board of Diretors comprising of  promoters and Indipendent Directors to present cooked-up figures quarter after quarter?

Why did not the people responsible for maintenance of accounts - the team led by the Chief Financial Officer Mr Srinivas - reveal this massive fraud?

The Supreme Court has upheld the decision of the Andhra Pradesh High Court in the L&T case.

The Andhra Pradesh Commercial Tax Authorities had demanded VAT from the main contractor on the value sub contracts. The sub contractors were registered dealers and had paid VAT on the value of sub contracts executed by them. The plea of the main contractor that this will result in double taxation was not accepted by the Authorities. The Andhra Pradesh High Court vide its decision dated 12 Oct 2006 upheld the plea of the main contractor. The Andhra Pradesh Government had filed an appeal in the Supreme court against this decision.

This Section was inserted to help works contractors who had applied for compounding after the due date for submitting the application. The Kerala Finance Bill, 2008 had restricted the benefit to “pending cases”, but this restriction is seen removed in the Act.

But the question is whether this will help the dealers. The Department seems to have decided that this benefit will not be given to those dealers whose assessments have been completed and demand raised on them. This will automatically exclude a large number of dealers as the department has completed assessment in many cases, especially that of dealers having high turnover.

We have a peculiar problem in Kerala. Work contractors in Kerala, who do not opt for compounding, are not allowed to deduct the value of sub-contracts given to registered dealers while calculating their taxable turnover. However those contractors who opt for compounding are allowed to deduct the value of sub-contracts given to registered dealers.

This in effect results in both the main contractor and the sub-contractor paying value added tax on the same turnover, if the main contractor does not opt for compounding.

Orissa Value Added Tax Act, 2004 allows the dealer to claim input tax credit on the following purchases:

a) goods purchased for resale

b) goods purchased for use in works contract

c) goods purchased for use in processing or manufacture of goods, where such purchases directly go into composition of the finished goods, and

d) consumables purchased, where such consumables are directly used in such manufacture or processing.

In Reliance Industries Ltd v Asst Commissioner of Sales Tax and Others, the Orissa High Court decided the following questions:

In Ponds India Ltd (Merged with HL Ltd) v. Commissioner of Trade Tax, Lucknow , the Supreme Court answered the question, whether petroleum jelly is a “drug” or a “cosmetic”

The tax authorities have been assessing petroleum jelly as a drug (and not as a cosmetic) for a long time. This product is produced under a drug manufacturing licence under the Drugs and Cosmetics Act, 1940. The report of the Chemical Examiner also supported the contention of the appellant that petroleum jelly is a drug.

Therefore, Supreme Court held that white petroleum jelly is a drug and not a cosmetic.

Gauhati High Court has decided in Magus Construction Pvt Ltd and another vs Union of India and others that construction of buildings on own account and subsequent sale thereof to customers does not attract service tax. Service tax on works contract is leviable only where there is a contract between the contractor and the customer and the contractor provides service to the customer.

In this case the contractor entered into an agreement for sale of flats and received the consideration in instalments. The High Court held that the contractor did not provide any service to the buyers and hence service tax was not attracted.

The Assam Entry Tax Act, 2008 has received the assent of the Government of Assam on 13th April,2008. The Preamble to the Act reads, “Whereas it is expedient to provide for the imposition of a tax on the entry of goods into any local area in Assam for consumption, use or sale therein for the purpose of providing the infrastructure and amenities to facilitate trade and commerce within the state of Assam and for matters connected there with or incidental thereto;”. By adding the purpose for which the Entry Tax is proposed to be collected, the State Government has overcome the decision of the Assam High Court in ITC Ltd. vs State of Assam and others.

Several newspapers have reported today that rate of CST against C Forms has been reduced to 2% with effect from 1st June 2008.

However, the relevant notification is not available yet in the website of the Finance Ministry.