Goods And Service Tax India

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.

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 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 Joint Secretary (TRU), Tax Research Unit, Department of Revenue, Ministry of Finance, Government of India has issued a letter F. No. B1/16/2007-TRU to all officers of the Central Excise, Customs and Service Tax on the new services proposed to be taxed by the Finance Act, 2007. The new services come under the service tax net from 1 June 2007.

One of the new services brought to tax is “service provided in relation to the execution of a works contract”.

The Joint Secretary (TRU), Tax Research Unit, Department of Revenue, Ministry of Finance, Government of India has issued a letter F. No. B1/16/2007-TRU to all officers of the Central Excise, Customs and Service Tax on the new services proposed to be taxed by the Finance Act, 2007. The new services come under the service tax net from 1 June 2007.

One of the new services brought to tax is “service provided in relation to the execution of a works contract”.

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.