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.

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:

Strange, but true.

The Commercial Tax Authorities have been contending that discount received should be treated as turnover and that the dealer should pay tax thereon.

I am unable to find any provision in the Act or the Rules that supports the contention of the authorities.

Sec 2(xliv) defines “sale price” as the consideration received less any discount allowed.

Explanation III(ii) to Sec 2(lii) says that any discount allowed shall not be included in the turnover where such discount is shown separately in the invoice.

I had written on the above subject on 25th Sep 2007 that a clarification would help in resolving conflicting views being taken by assessing officers in Kerala on the rate of tax for Multi Function Printers capable of printing, copying, scanning, sending fax, etc

The Commissioner of Commercial Taxes, Kerala Sri Paul Antony has in a mail dated 19th October 2007, stated that “We have acted on your representation and have forwarded the list as per attachment to Government for notification of VAT @ 4% w.e.f. 1-4-2007″. However the list has not been notified till now.

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%.

Multi Function Printers were under HSN Code 8471.60.27 till 31 Dec 2006 and were allotted HSN Code 8443.31 from 1 Jan 2007. Printers are now under HSN Code 8443.32.

The Kerala Finance Act, 2007 had modified the schedule entry relating to IT Products and printers are now a distinct entry under Sl No 69(22)(c) of the Third Schedule to the Kerala Value Added Tax Act, 2003 wef 1st April 2007.

Therefore it was assumed that MFPs under HSN Code 8443.31 would now suffer tax at 12.50%.

The Madhya Pradesh VAT Act was amended by Amendment Act, 2007 and the amendments came into effect from 1st April 2007. In Sec 7, a new clause to sub-section (1) has been inserted and the amended provisions are:

The Kerala Finance Act, 2007 has finally been enacted with a number of changes from the proposals in the Kerala Finance Bill, 2007.

The Third Schedule has been amended to replace the list of IT Products taxed @ 4%. A major change is the new HSN Code of printers. Earlier Printers were under HSN Code 8471 and multi-function devices comprising copier, printer, scanner and fax were also classified under this Code and were taxed @ 4%. The Kerala Government had maintained that this was not correct as photocopiers were taxed @ 12.50%. However, as these devices were classified under HSN Code 8471, they were liable to be taxed @ 4% and not 12.50%.