Tax deducted at source under KVAT is deductible from total turnover and excluded from taxable turnover.

Amounts collected by way of tax under the Karnataka Value Added Tax Act, 2003 are deductible from total turnover under Rule 3(2)(h) of the Karnataka Value Added Tax Rules, 2005, and therefore cannot be included in taxable turnover. The text also states that a revisional view denying such deduction on the ground that no express provision existed was erroneous, because the governing rule itself permitted the deduction. The stated effect is that TDS amounts collected under the Act should be excluded while computing taxable turnover.

---

---

Issues: Whether tax deducted at source under the Karnataka Value Added Tax Act, 2003 was deductible from the total turnover while computing taxable turnover, and whether the revisional order disallowing such deduction was sustainable.

Analysis: Rule 3(2)(h) of the Karnataka Value Added Tax Rules, 2005 permits deduction of all amounts collected by way of tax under the Act from the total turnover. The amount deducted at source from the appellant was collected under the Act, and therefore could not be added to the total turnover for determining taxable turnover. The revisional authority had correctly dropped the proceedings in respect of that amount, but the second revisional order failed to apply the governing rule and proceeded on an erroneous view that no such deduction was available in the absence of an express provision.

Conclusion: The deduction of TDS was allowable, and the contrary revisional order was unsustainable.

Final Conclusion: The substantial questions of law were answered in favour of the appellant, the impugned revisional order was quashed, and the appeal succeeded.

Ratio Decidendi: Amounts collected by way of tax under the Act are deductible from total turnover under Rule 3(2)(h) of the Karnataka Value Added Tax Rules, 2005, and cannot be included in taxable turnover.

---