Composition Dealer

[Bayyareddy DK]

sir,

My client a hotelier is paying Karnataka VAT under composition scheme. In the year 2011-12 & 12-23, entered a joint development agreement in a new venture to construct hotel rooms 50/50. On advances received, voluntarily paid tax @4%. Separate books maintained for Hotel and construction services. Option of selecting 4% composition on construction services is not intimated to VAT office. Officer reassessed the taxes @ 14.5% on construction advances?. My client is a eligible dealer for composition scheme but not submitted the option leads to higher rate of Tax?. Please advice.

[Bayyareddy DK]

sir,

My client a hotelier is paying Karnataka VAT under composition scheme. In the year 2011-12 & 12-13, entered a joint development agreement in a new venture to construct hotel rooms 50/50. On advances received, voluntarily paid tax @4%. Separate books maintained for Hotel and construction services. Option of selecting 4% composition on construction services is not intimated to VAT office. Officer reassessed the taxes @ 14.5% on construction advances?. My client is a eligible dealer for composition scheme but not submitted the option leads to higher rate of Tax?. Please advice.

AI Summary

Hotelier Faces 14.5% VAT on Construction Advances Due to Missing Composition Scheme Option Submission for 2011-13 A hotelier client, paying Karnataka VAT under the composition scheme, entered a joint development agreement in 2011-12 and 2012-13 to construct hotel rooms on a 50/50 basis. The client voluntarily paid a 4% tax on advances received, maintaining separate books for hotel and construction services. However, the option to select 4% composition on construction services was not communicated to the VAT office, leading to a reassessment at 14.5% on construction advances. The client is eligible for the composition scheme but failed to submit the required option, resulting in a higher tax rate. Advice is sought on this issue.