Compounded contract turnover includes tax recovered by the awarder, unless separately reimbursed as actual tax collected.

Under the Kerala General Sales Tax Act compounding scheme, tax is levied on the whole contract amount rather than the net sum received after deductions. Sales tax recovered and remitted by the awarder from the contractor's bill is treated as part of contract turnover for compounding purposes, with credit to be given in assessment. Such recovery is excluded only where the contract separately provides reimbursement of actual tax paid by the contractor in a manner amounting to tax collection under the applicable rule. The document states that exclusion was rejected and the contract recoveries were to be reckoned in turnover.

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Issues: Whether sales tax recovered and remitted by the awarder from the contractor's bill was to be excluded from the turnover for computing tax at the compounded rate under section 7(7) of the Kerala General Sales Tax Act, 1963.

Analysis: The compounding provision taxes the contractor on the whole amount of contract, not on the net amount received after deductions. Recovery by the awarder is only a mode of advance collection and does not itself determine the final tax liability, which is adjudicated in assessment. The amount so recovered and remitted is to be given credit in assessment and therefore remains part of the contract turnover for compounding purposes. Only where the contract separately provides for reimbursement of actual tax paid by the contractor does the amount partake the character of tax collection attracting exclusion under rule 9(1), and even that does not alter the basis of taxation under the compounding scheme.

Conclusion: The recovered and remitted tax amount is to be reckoned as part of the turnover for determining tax on the contract amount under the compounding scheme, and the contention of exclusion was rejected.

Final Conclusion: The revision was allowed and the Tribunal's view excluding such recoveries from turnover was set aside.

Ratio Decidendi: Under a compounding provision taxing the whole contract amount, sums recovered by the awarder as advance tax remain part of turnover unless they are separately reimbursed as actual tax in a manner amounting to tax collection under the applicable rule.

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