Work Contract under UPVAT Act

[Jasbir Uppal]

Dear professional bothers & sisters,

My client is dealing in the business of civil work contract & for consumption of material import the goods from outside Uttar Pradesh. As specified in the work order signed between the contractor and contracttee . The goods dispatched from outside state to the respective sites as compliance of Section 3 of CST Act,1956.

As per provisions of Rule 9 Determination of turnover of sale of goods involved in the execution of a works contract deducted all amounts representing the value of goods in which property has been transferred in the execution of the works contract as a result of sale in the course of interstate trade or commerce from the total amount.

Our question is when the appellant authorities allowed exemption on inter-state transaction under Rule 9(e) of UPVAT will the assessing officer would also have power to impose the tax on central sale after treating these transactions as central sale under section 29 sub section 9 of UPVAT act. Even if the assessing officer has allowed exempt transaction in his original central sale tax assessment order.

Please provide case laws.

With Regards

J.S.Uppal

Tax Consultant

[SURENDRA BABU MUTHYALA]

If you have opted for payment of WCT under composition scheme, then obviously the value of goods purchased n the inter-state trade would be deducted to arrive the total taxable turnover under composition scheme. This is the essence of Rule 9 (e) of UPVAT.

The goods purchased in the course of interstate trade for incorporation of the same in the course of execution of works contract within the State of UP, and the transfer of property in the Work Contract, are liable to tax at the prevailing local rate of tax (UPVAT) besides the tax on composition scheme.

You are exempted from payment of WCT if the goods are purchased from outside the State of UP and the works are executed out side the State of UP only.

The issue can be more clarified whether this is a works contract within state of UP or an interstate contract outide the State of UP.

[Jasbir Uppal]

Dear SURENDRA BABU MUTHYALA,

Thank you sir for your valuable opinion on our issue.

But our quarry is when the appellant authorities allowed exemption on inter-state transaction under section 3 of C.S.T. act under Rule 9(e) of UPVAT all amounts representing the value of goods in which property has been transferred in the execution of the works contract as a result of sale in the course of interstate trade or commerce because the dealer has not opted compounding scheme. Will the assessing officer would also have power to impose the tax on central sale after treating these transactions as central sale under section 29 sub clause 9 of UPVAT act. Even if the assessing officer has allowed exempt transaction in his original central sale tax assessment order.

Section 29 Sub clause 9 of UPVAT act read as follows:-

Where in the assessment or re-assessment of a dealer for any assessment year, any assessing authority, -

(a) has included any turnover and any superior authority or Court has, in exercise of the powers lawfully vested in it, held such turnover to relate to the assessment of- (i) such dealer for any other assessment year, or (ii) such dealer under the Central Sales Tax Act, 1956, or (iii) any other dealer, whether under this Act, or under the Central Sales Tax Act, 1956,

(b) has not included any turnover on the ground that it relates to assessment under the Central Sales Tax Act, 1956 and any superior Authority or Court has, in exercise of the powers lawfully vested in it, held such turnover to relate to the assessment of that dealer under this Act, whether for such assessment year or any other assessment year, then nothing contained in this section limiting the time shall apply to assessment or re-assessment whether under this Act or under the Central Sales Tax Act, 1956 of such dealer or such other dealer, relating to such assessment year or such other assessment year, as the case may be.

Act or under the Central Sales Tax Act, 1956 of such dealer or such other dealer, relating to such assessment year or such other assessment year, as the case may be.

With Regards

J.S.Uppal

Tax Consultant

AI Summary

Interstate goods in works contracts: exclusion from local turnover may be recharacterised, enabling reassessment under central sales tax provisions. Whether value of goods purchased interstate and incorporated into a works contract may be excluded from taxable turnover under Rule 9(e) and whether an assessing authority can later treat those supplies as central sales and reopen assessment under the UP VAT Act are central. Rule 9(e) allows deduction of amounts representing value of goods sold in the course of interstate trade when determining works-contract turnover, while the UP VAT reassessment provision permits reopening where turnover is later held to relate to assessment under the Central Sales Tax Act or this Act.