Foreign exchange gain on works-contract consideration forms taxable turnover after permissible deductions under sales tax law.

Foreign-currency consideration received under a works contract retained its character as turnover when converted into Indian rupees, and exchange-rate fluctuation did not create a separate non-taxable receipt. After allowing deductions permitted under the Act and Rules, including amounts paid to the subcontractor on which tax had already been discharged, the balance was treated as differential turnover arising from the contract. The Kerala High Court held that the additional rupee realisation was part of taxable turnover under the Kerala General Sales Tax Act, and the levy on the exchange-fluctuation component was sustainable.

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Issues: Whether the additional amount realised by the assessee on account of foreign exchange fluctuation in respect of a works contract was part of the turnover liable to tax under the Kerala General Sales Tax Act.

Analysis: The amount received in foreign currency represented the consideration for the supply of equipment under the works contract. Conversion of that consideration into Indian rupees did not change its character. Once the deductions permissible under the Act and Rules, including amounts paid to the subcontractor on which tax had already been discharged, had been granted, the balance remained differential turnover arising from the contract. The exchange fluctuation merely affected the rupee realisation of the same taxable consideration and did not create a separate non-taxable receipt.

Conclusion: The differential amount was rightly treated as part of the taxable turnover and the levy under the Kerala General Sales Tax Act was sustainable.

Final Conclusion: The revisions failed and the tax demand on the exchange-fluctuation component was upheld.

Ratio Decidendi: Amounts realised in Indian rupees from a works-contract consideration expressed in foreign currency retain the character of turnover, and exchange-rate gain on such realisation is taxable turnover after allowable deductions.

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