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

Composition scheme eligibility affects tax treatment of construction advances when option not intimated, resulting in reassessment at higher rate. A hotelier under the composition scheme received construction advances under a joint development agreement, voluntarily paid tax at the composition rate and kept separate books, but did not intimate the VAT office of the option to apply composition to construction services; the officer reassessed those advances at a higher standard rate, raising a tax liability.