Goods And Service Tax India

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.

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:

The Assam High Court had occasion to decide whether the Assam VAT Act could levy tax on declared goods such as iron and steel used in works contracts at a rate higher than that allowed by Sec 15 of the Central Sales Tax Act, 1956.

The commercial tax authorities of Assam proposed to levy VAT @ 12.50 % on all goods used in works contracts. The Commissioner of Commercial Taxes, Assam clarified that the State can levy tax on works contract by treating the same as distinct species apart from the constituent materials undergoing bodily transfer. This meant that even declared goods would be taxed at 12.50%.

The High Court of Andhra Predesh, in L&T vs State of Andhra Predesh, has held that where a contractor sub-contracts a part of the contract to a sub-contractor, there is only one taxable event.

The commercial tax authorities contended that there is no provision to deduct the turnover of the sub-contractor, on which value added tax has been paid by the sub-contractor, from the turnover of the main contractor. They also refused to give credit for the tax paid by the sub-contractor in computing the tax payable by the main contractor.

In Sree Durga Distributors vs State of Karnata, the Supreme Court decided that pet food for cats and dogs will not fall under Entry 5 of the First Schedule to the Karnataka Value Added Tax Act, 2003.

The entry reads as under :

“5. Animal feed and feed supplements, namely, processed commodity sold as poultry feed, cattle feed, pig feed, fish feed, fish meal, prawn feed, shrimp feed and feed supplements and mineral mixture concentrates, intended
for use as feed supplements including de-oiled cake and wheat bran.”

These products will not be eligible for exemption from VAT.