vat applicability on works contracts under kerala vat act

[Guest]

Gentlemen

our delhi client having branch in kerala prefered to pay vat under composite tax for works contract. Kindly advise with notification if he has to calculate vat on works contract amt added service tax amt or on works contract value only.

rgds

 

[RAMASWAMY KRISHNAIYER]

The issue is whether service tax has also to be included to calculate sales tax. 

The position in this regard is laid down in Anand Swarup Mahesh Kumar v Commissioner of Sales Tax (46 STC 477)(SC) = (1980 (9) TMI 238 - SUPREME COURT OF INDIA). The relevant portion of the judgment is extracted below:-

Where a dealer is authorised by law to pass on any tax payable by him on a transaction of sale to the purchaser, such tax does not form part of the consideration for purposes of levy of tax on sales or purchases but where there is no statutory provision authorising the dealer to pass on the tax to the purchaser, such tax does form part of the consideration when he includes it in the price and realises the same from the purchasers. The essential factor which distinguishes the former class of cases from the latter class is the existence of a statutory provision authorising a dealer to recover the tax payable on the transaction of sale from the purchaser.

 In the case of service tax, the Finance Act, 1994 permits collection of service tax. Therefore service tax will not form part of sale price.

However the clarification by the Authority for Clarifications, u/s. 94 (ORDER No.C3/4174/10/CT DATED 31/3/2010) of the Kerala VAT Act is on the contrary. Copy of the clarification is attached. According to the said clarification, VAT has to be calculated after adding service tax.  We are personally of the view that the clarification does not lay the correct position of law, especially since the above decision has not been considered. 

[Guest]

Respected Ramasamy Sir

 

We thank you so much for the timely help. Kindly also advise us what to do if we want to re-generate online C forms for the act.year 2011-12 as the purchase bill dates are wrongly submitted in the returns and so the c forms generated were not accepted by the supplier.

Ravikumar chennai 9094043313 [email protected]

AI Summary

Service tax inclusion in VAT: Kerala clarification conflicts with principle that authorised tax collections are excluded from sale consideration. The legal question is whether service tax must be included in the VAT base for works contracts. Established principle: taxes statutorily authorised to be collected from purchasers do not form part of sale consideration; the Finance Act authorises collection of service tax, so service tax should not form part of the sale price. A Kerala VAT authority clarification requires VAT after adding service tax, a position the commentator considers inconsistent with the cited precedent and statutory collection authority.