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.

The Finance Minister had introduced this proposal to reduce litigation. But the refusal by officers to condone delay in cases where the assessments are completed will only increase litigation.

The reason for this is that the Kerala Value Added Tax Act, 2003 does not allow dealers who did not opt for compounding to reduce the value of sub-contracts given to registered dealers while computing the taxable turnover. This goes against the verdict of the Andhra Pradesh High Court in Larsen & Toubro Ltd vs. State of Andhra Pradesh [2006] 148 STC 616 (AP). In that case the High Court had occasion to decide on the same issue and had held that the Andhra Pradesh Government must amend the Rules to ensure that both the main contractor and the sub-contractor were not called upon to pay tax on the same turnover.

The Government would have achieved their goal of reducing litigation if the contractor was given an opportunity to file the compounding application now and the delay was condoned, while at the same time allowing the officers to rectify the assessment order to give effect to the condonation of delay.

We earnestly hope that the Finance Minister will look into this. Such a direction will not only help the dealers, but also avoid litigation. Further, the Government must amend the Rules to ensure that tax is not demanded from the main contractor and the sub-contractor for the same work.