Composite works contract treatment upheld for wind turbine project; service tax on labour did not exclude composition tax liability.

Contracts for civil foundation, electrical installation, supply of electrical items, and erection and commissioning of wind turbine generators were treated as one integrated composite works contract because the offer letter, scope of work, and insurance clause showed a single contractual arrangement rather than independent contracts. Once composition under Section 15(1)(b) of the Karnataka Value Added Tax Act, 2003 was opted for, tax applied to the total consideration of the works contract, including labour and material components. Split invoicing or payment of service tax on the labour element did not change the composite character of the contract or exempt the assessee from composition tax.

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Issues: Whether the contracts for civil foundation, electrical installation, supply of electrical items, and erection and commissioning of wind turbine generators constituted one composite works contract for the purpose of composition tax under Section 15(1)(b) of the Karnataka Value Added Tax Act, 2003; and whether payment of service tax on the labour component excluded liability to composition tax under the Act.

Analysis: The contract documents showed that the activity was undertaken as one integrated project for installation, erection, and commissioning of wind turbine generators. The offer letter, scope of work, and insurance clause indicated that the various work orders were only different parts of a single contractual arrangement and not independent contracts. Once composition under Section 15(1)(b) was opted for, the tax was payable on the total consideration of the works contract, which includes both labour and material components. The fact that invoices were split or that service tax was paid on part of the receipts did not alter the composite nature of the contract, because the tax under the sales tax enactment and service tax operated in different fields.

Conclusion: The contracts were rightly treated as one composite works contract, and composition tax was leviable on the total consideration. The payment of service tax on the labour component did not absolve the assessee from liability under Section 15(1)(b) of the Karnataka Value Added Tax Act, 2003.

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