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2020 (4) TMI 729 - HC - GSTMethod of calculation of tax liability - execution of works contract - whether tax liability should be determined as per the GST regime @ 12% or under the VAT regime @5%? - HELD THAT - Circular No.3/2017-GST dated 24.08.2017 clearly defines the mechanism for payment of GST and deduction of tax at source (TDS) in respect of works contractors and suppliers - The aforesaid Circular dated 24.08.2017 has provided the detailed methodology for payment of tax by way of TDS in respect of works executed during and post VAT period. This Court is of the view that under such circumstances, the Commissioner of Taxes, Assam will decide the exact liability of the petitioner to pay tax by referring to the said Circular No.3/2017-GST dated 24.08.2017 so that the petitioner can pay tax as liable to be paid by him either under the rate fixed under the VAT regime or under the GST regime, as the case may be - the matter is remanded to the Commissioner of Taxes, Assam for determination of tax liability of the petitioner which may be decided on the basis of the Circular dated 24.08.2017 and the petitioner will accordingly deposit the determined tax amount. Petition allowed by way of remand.
Issues:
Determining tax liability under GST regime or VAT regime for a government registered contractor of Class I(A) category. Analysis: The judgment involves the determination of the tax liability to be paid by the petitioner upon the successful execution of a works contract, specifically whether it should be under the GST regime at 12% or under the VAT regime at 5%. The petitioner, a government registered contractor, successfully completed works during the VAT regime and argues for a 5% VAT liability instead of 12% under the GST regime which came into effect on July 1, 2017. The petitioner sought clarification from the Commissioner of Taxes, Assam, but the response did not conclusively decide the applicable tax regime. Respondent Nos. 3 and 4 clarified that under GST law, tax liability arises upon the supply of goods and services, and a contract executed before July 1, 2017, will attract GST liability if the supply is made post that date and payment is received during the GST regime. They referred to Circular No. 3/2017-GST, which outlines the mechanism for payment of GST and tax deduction at source for works contractors and suppliers. The Circular dated August 24, 2017, provides a detailed methodology for tax payment, including TDS, for works executed during and post the VAT period. The High Court remanded the matter to the Commissioner of Taxes, Assam, for determining the petitioner's tax liability based on Circular No. 3/2017-GST. The petitioner is directed to submit a detailed application with supporting documents within two weeks for the Commissioner to make this determination. The petitioner retains the right to challenge the tax liability determination in an appropriate forum, including the High Court, if aggrieved. The writ petition is disposed of, emphasizing the need for a clear determination of tax liability by the tax authorities based on the relevant circular and legal provisions.
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