Goods And Service Tax India

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%.

The Assam High Court, while delivering the judgement in ITC Ltd vs State of Assam & Others, held that the Assam Entry Tax (Amendment) Ordinance, 2005 is unconstitutional and invalid. The notifications dated 8th Jan 2002, 21st Aug 2003, 26th Aug 2006, 29th Sep 2004 and 28th Feb 2005 were also held to be ultra vires, unconstitutional, null and viod. [Date of decision: 17th November 2006]

It is to be noted that the Assam Entry Tax Act, 2001 is still valid. However, addition of new goods to the Schedule to the Act for imposing entry tax was held to be beyond the competence of the state legislature as the prior sanction of the resident was not obtained.

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 Rajasthan High Court [Jodhpur Bench], while delivering the judgement in Dinesh Pouches Ltd vs State of Rajasthan & Others, held that the Rajasthan Tax on Entry of Goods into Local Areas Act, 1999 is unconstitutional and invalid.

The High Court held that the Act was not compensatory as no special services were provided to those from whom the tax was collected. The Act was held to impede interstate trade and commerce. The prior assent of the President was not obtained as required by Article 304(b) of the Constitution.

Date of decision: 21st August 2007

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 Karnataka High Court, while delivering the judgement in Bharat Earth Movers Ltd vs State of Karnataka & Others [2007] 8 VST 69 (Karn), held that Karnataka Special Tax on Entry of Certain Goods Act, 2004 is unconstitutional and invalid.

The High Court held that the Act was not compensatory as no special services were provided to those from whom the tax was collected. The Act was held to impede interstate trade and commerce. The prior assent of the President was not obtained as required by Article 304(b) of the Constitution.

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 Madras High Court in ITC Ltd vs State of Tamil Nadu and Another has struck down the Tamil Nadu Entry Tax Act. The Court refused to accept the government argument that it is compensatory in character. It also held that the entry tax is discriminatory and violative of article 304(a) of the Constitution.

The State’s plea that the entry tax is collected to reimburse the expenses for maintenance of roads and bridges was not accepted by the Court. The Court applied the test laid down by the Supreme Court in Jindal Stainless Ltd case and held that the expenses sought to be reimbursed have no connection with the collection of entry tax. The persons paying the entry tax do not get any special benefit as a class. Hence it is not compensatory.