9911796707
TMI Blog2009 (11) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... ould also come within the total turnover of the appellant. The abovesaid authority after hearing the appellant herein held as follows: (a) In the absence of specific provisions for deduction on the turnover of the sub-contractor, up to March 31, 2006 the activity of the works contract is exigible to tax at the rate applicable to goods involved in the transfer of property under the KVAT Act, 2003 and section 4(1)(c) of the KVAT Act with effect from April 4, 2006; (b) The payments made to the sub-contractors are not eligible for deduction up to March 31, 2006; and, (c) The sub-contractor turnover is eligible for deduction with effect from April 1, 2006 by virtue of notification dated May 27, 2006. We have heard Sri V. Srinivasa Raghavan appearing for the appellant and Smt. Geetha Menon, the learned Government Advocate appearing for the respondents and perused the order dated July 29, 2006 passed by the Authority for Clarification and Advance Rulings. It is the contention of the learned counsel for the appellant that the activity of works contract up to March 31, 2006 is exigible to the KVAT Act, 2003 as ruled by the authority is erroneous for the following reasons: (i) Works e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contract executed refers to consideration received for execution of works contract by the principal contractor by himself or includes any consideration received but paid to subcontractors as consideration for portions of work executed by sub-contractors? 2.. Whether under section 15 of the KVAT Act, 2003, for the period prior to March 1, 2006 the principal contractors involved in the business of carrying out works contract of constructing buildings is entitled for deduction of payment made by them to sub-contractors who are registered dealers to whom portions of the work has been sub-contracted, as consideration to them for the portions of the work executed by such contractors, from the total consideration received by the principal contractor?" As per section 3(1) of the KVAT Act every sale of goods in the State by registered dealer or a dealer is leviable to tax in accordance with the provisions of the Act. The "works contract" having defined under section 2(37) is also leviable to tax where there is transfer of property involved. The Karnataka Value Added Tax Act, 2003 came to be amended by Act No. 4 of 2006 wherein clause (c) to sub-section (1) of section 4 was amended whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y input tax on any purchases made by him. (5) Notwithstanding anything contained in sub-sections (1) and (4),- (a) a dealer executing works contracts and who purchases or obtains goods from outside the State or from outside the Territory of India shall be eligible to opt for composition under sub-section (1), and if the property in such goods (whether as goods or in some other form) is transferred in any works contract executed by him, the dealer shall be liable to pay tax on the value of such goods at the rate specified in section 4, and such value shall be deducted from the total consideration of the works contracts executed on which an amount as notified is payable under sub-section (1) by way of composition in lieu of the tax payable under the Act; (b) in the case of a dealer executing works contracts and opting for composition of tax under sub-section (1), no tax by way of composition shall be payable on the amounts paid to a sub-contractor as consideration for execution of works contract whether wholly or partly and such amounts shall be deducted from the total consideration of the works contracts executed on which an amount as notified is payable under under sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that every dealer executing works contract shall pay tax on the value of goods at the time of incorporation of such goods in the works executed at the rates applicable to the goods under the Act. The point to be noted is that section 4(7)(a) of the 2005 Act indicates that the taxable event is the transfer of property in goods involved in the execution of a works contract and the said transfer of property in such goods takes place when the goods are incorporated in the works, the value of the goods which constitutes the measure for the levy of the tax is the value of the goods at the time of the incorporation of the goods in the works. What is stated hereinabove also finds place in rule 17(1)(a) of the APVAT Rules, 2005, quoted hereinabove. It is important to note that each of the sub-contractors of L&T is registered dealer. None of them are unregistered. Under section 4(7)(a) read with rule 17(1)(c), quoted above, where a VAT dealer awards any part of the contract to a sub-contractor, such subcontractor shall issue a tax invoice to the contractor for the value of the goods at the time of incorporation in such sub-contract. The tax charged in the tax invoice issued by the sub-cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases to execute the work because the property passes by accretion and there is no property in goods left with the contractor which is capable of retransfer either as goods or in any other form. Thus, the transfer of property is from sub-contractor to the contracting party that is contractee, namely, the recipient. Hence the work executed by the subcontractor results in single transaction and not as multiple transaction. Hence, it would be erroneous to hold that the payments made by the contractor to the sub-contractor would require to be brought within the total turnover of the appellant or contractor and if such an interpretation is to be given it would lead to double taxation and hence we are of the opinion that the question of law formulated hereinabove is to be held as follows: (i) The consideration for execution of works contract executed refers to consideration received by the principal contractor and does not include the consideration received and paid to sub-contractor. (ii) Under section 15 of the KVAT Act, 2003 for the period up to March 1, 2006 the principal contractor is entitled for deduction of payment made by subcontractors only if they are registered deale ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
