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2009 (1) TMI 833 - HC - VAT and Sales Tax
Issues:
1. Interpretation of section 7(7) of the Kerala General Sales Tax Act, 1963 regarding the exclusion of sales tax recovered and remitted by the awarder from the contractor's bill from turnover for tax computation at a compounded rate. Analysis: The judgment of the High Court of Kerala involved the interpretation of section 7(7) of the Kerala General Sales Tax Act, 1963. The issue at hand was whether the sales tax recovered and remitted by the awarder from the contractor's bill should be excluded from the turnover for tax computation at a compounded rate. The respondent-assessee, engaged in civil construction work, had applied for permission to pay tax at a compounded rate under section 7(7) of the Act for the assessment year 1998-99. The State contended that tax should be paid at a compounded rate on the whole contract amount, not on the net amount received by the contractor after recoveries of tax by the awarder. The Court analyzed the provisions of section 7(7), which allowed contractors in civil works to pay tax at a compounded rate on the whole contract amount. The Court noted that the scheme of deduction and payment of tax by the awarder did not determine the actual tax payable by the contractor. It was highlighted that the recovered amount should be treated as payments made by the assessee, and the tax liability should be adjudicated accordingly. The Court emphasized that the recovery of tax by the awarder was different from the collection of tax by a dealer from customers on the sale of goods. The Court concluded that the tax recovered and remitted by the awarder from the contractor's bills should be considered as turnover for tax determination purposes, whether at a compounded rate or not. However, if the contract specified separate reimbursement of actual tax paid by the contractor, it should be excluded from the taxable turnover. Nevertheless, this exclusion did not affect the tax payable under the compounding scheme, which was based on the whole contract amount, inclusive of tax recovered from the contract payments made by the awarder. Consequently, the Court allowed the sales tax revision, overturning the Tribunal's order.
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