Running account bills as tax invoices: Karnataka Water Supply Board bills qualify for input tax credit under KVAT rules.

Running account bills prepared by the Karnataka Water Supply Board were treated as tax invoices for the limited purpose of Rule 27(2) of the Karnataka Value Added Tax Rules, 2005. The proviso was construed as a beneficial provision intended to allow contractors executing Government works to claim input tax credit while final bills are still unavailable. Reading the KVAT Act, 2003 and Rules as a whole, the Court found no basis to exclude the Board from the proviso merely because it was a statutory body. The running account bills therefore qualified for deduction of tax collected, and the revision petition failed.

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Issues: Whether running account bills prepared by the Karnataka Water Supply Board could be treated as tax invoices under the proviso to Rule 27(2) of the Karnataka Value Added Tax Rules, 2005, and whether the Board could be regarded as Government for that purpose.

Analysis: The proviso to Rule 27(2) was construed as a beneficial provision enacted to enable contractors executing Government works to avail input tax credit on the basis of running account bills, since final bills are not available during execution. Reading the proviso in the context of the scheme of the Karnataka Value Added Tax Act, 2003 and the Rules, the Court found no basis to exclude the Karnataka Water Supply Board from its ambit merely because it was a statutory creation. The Court agreed with the Tribunal that the running account bills prepared by the Board answered the description of tax invoices for the limited purpose of computing tax collected and allowing deduction.

Conclusion: The running account bills prepared by the Board were held to be tax invoices for the purpose of Rule 27(2), and the revision petition failed.

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