Principal contractor's payments to sub-contractors count in total turnover for turnover tax under the Karnataka Sales Tax Act.

Amounts paid by a principal contractor to a sub-contractor in execution of a works contract form part of the principal contractor's total turnover for turnover tax under section 6B of the Karnataka Sales Tax Act, 1957. Although the scheme allows deduction of such payments when computing taxable turnover in a works contract, turnover tax is levied on total turnover on a multi-point basis and is not confined to taxable turnover alone. The value paid to the sub-contractor is therefore includible in total turnover and remains liable to turnover tax; the challenge fails.

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Issues: Whether the value of work entrusted to a sub-contractor forms part of the principal contractor's total turnover and attracts turnover tax under section 6B of the Karnataka Sales Tax Act, 1957.

Analysis: The statutory scheme distinguishes between taxable turnover and total turnover. The definitions of "sale", "turnover", "taxable turnover" and "total turnover", together with section 5B and rule 6 of the Karnataka Sales Tax Rules, 1957, show that in a works contract the transfer of property in goods involved in execution of the contract is taxable, and amounts paid to a sub-contractor may be deducted for taxable turnover where the prescribed conditions are met. However, section 6B levies turnover tax on total turnover, and the scheme of that provision indicates a multi-point levy. On that basis, the amount paid by the principal contractor to the sub-contractor, even if the sub-contractor is separately liable, remains part of the principal contractor's total turnover for section 6B purposes.

Conclusion: The value paid to the sub-contractor is includible in the principal contractor's total turnover and is liable to turnover tax under section 6B; the challenge fails.

Ratio Decidendi: For turnover tax under section 6B, amounts paid by a principal contractor to a sub-contractor in execution of a works contract are includible in total turnover, because turnover tax is levied on total turnover on a multi-point basis and not confined to taxable turnover alone.

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