Composition under VAT for apartment development includes post-sale finishing works when part of original agreement.

Post-sale completion and finishing works for residential apartments sold as semi-finished structures remain within the composition scheme when they form part of the original development bargain. The finishing agreement is treated as a continuation of the same integrated transaction, not a separate works contract taxable independently under the works contract provisions. Taxable turnover under the composition scheme extends to the entire consideration under the initial agreement, including the finishing agreement, and is not confined to the amount shown in the registered sale deed, subject to the statutory requirement that tax be computed on the higher of the agreed consideration or stamp duty value.

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Issues: (i) Whether post-sale completion and finishing works in respect of residential apartments sold as semi-finished structures are eligible for composition under Section 4(7)(d) of the A.P. VAT Act; (ii) whether such post-sale works are independent works contracts taxable under Section 4(7)(a) or Section 4(7)(b); (iii) whether the taxable turnover under Section 4(7)(d) is confined to the amount mentioned in the registered sale deed or extends to the entire consideration under the initial agreement, including the finishing agreement.

Issue (i): Whether post-sale completion and finishing works in respect of residential apartments sold as semi-finished structures are eligible for composition under Section 4(7)(d) of the A.P. VAT Act.

Analysis: Section 4(7)(d) applies to dealers engaged in the construction and sale of residential apartments, houses, buildings or commercial complexes. The words used in the provision and the connected rules were construed as referring to a developer who undertakes construction and sale as one integrated commercial activity, not as a fragmented sequence that loses the benefit of composition merely because a registered sale deed is executed for a semi-finished structure during the course of the project. The finishing/completion agreement was treated as an integral continuation of the original bargain and not as a separate commercial venture outside the composition scheme.

Conclusion: Yes. The post-sale finishing works, when undertaken in terms of the initial agreement for the same purchaser, remain eligible for composition under Section 4(7)(d).

Issue (ii): Whether such post-sale works are independent works contracts taxable under Section 4(7)(a) or Section 4(7)(b).

Analysis: The Court held that splitting the project into pre-sale, sale deed, and post-sale finishing stages would make the statutory scheme unworkable and would artificially sever what is commercially one contract. The finishing agreement was held to be part and parcel of the same development transaction, and the developer's liability under the composition scheme could not be recharacterised by the mere execution of a sale deed for a semi-finished flat. Only works beyond or independent of the initial agreement would fall outside Section 4(7)(d).

Conclusion: No. The post-sale finishing works, when referable to the original development agreement, are not to be treated as independent works contracts taxable separately under Section 4(7)(a) or Section 4(7)(b).

Issue (iii): Whether the taxable turnover under Section 4(7)(d) is confined to the amount mentioned in the registered sale deed or extends to the entire consideration under the initial agreement, including the finishing agreement.

Analysis: The tax under Section 4(7)(d) was held payable on the composite value of land and building as agreed in the initial transaction, subject to the statutory requirement of payment on the higher of the agreed consideration or stamp duty value. The Court treated the sale deed value and the finishing agreement value as only two parts of the same original consideration. It also held that the rules requiring filing and payment at the stage of registration did not permit the revenue's narrower bifurcation of the consideration into separate taxable segments.

Conclusion: It extends to the entire consideration under the initial agreement and not merely to the amount shown in the registered sale deed.

Final Conclusion: The impugned assessments were unsustainable because the petitioners, having opted for composition under Section 4(7)(d) and complied with the prescribed conditions, were entitled to have the entire development transaction assessed under that scheme, including post-sale completion works undertaken for the same purchaser under the original agreement.

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