Ruling under section 85 of DVAT Act, 2004 in respect of Horticulture Contracts.

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....VAT is applicable on Horticulture composite contracts wherein goods involved/used for execution of such works contract are covered under Schedule I of the DVAT Act, 2004 and are exempted from levy of VAT?" The said application has generic ramification as regards the legal position in respect of taxability of exempted goods when used in the execution of works contract, both to the authorities subordinate to the Commissioner, VAT, Govt. of NCT of Delhi and the entities/dealers who are carrying on or who may undertake such transactions. 2. While explaining the nature of transaction, the applicant in his application dated 20.12.2012 has stated that many departments/organizations/companies award horticulture contracts, which may include develo....

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....n, the building construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, repair or commissioning of any moveable or immovable property; (ii) Relevant Provisions of the DVAT Act section 4 Rates of tax (1) The rates of tax payable on the taxable turnover of a dealer shall be- (a) in respect of goods specified in the Second Schedule, at the rate of one paisa in the rupee; (b) in respect of goods specified in the Third Schedule, at the rate of four paise in the rupee; (c) in respect of goods specified in the Fourth Schedule, at the rate of twenty paise in the rupee; (d) in respect of the goods involved in the execution of the works contract, at the rate of twelve and a half paise in the rupee;....

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....ther form) involved in the execution of work contract and shall exclude - (i) the charges towards labour, services and other like charges; and (ii) the charges towards cost of land, if any, in civil works contracts; 4. It is relevant here to mention that in the Horticulture Contracts involving development of lawns/parks/roadsides and their maintenance, there may be use of taxable goods such as bricks, stones, cement and exempted goods such as plants, fertilizers, etc. However, in exclusive horticulture contracts, the tax-free goods such as seeds, saplings, plants, organic manure, fertilizers, bio-inputs like bio-fertilizers, micronutrients and plant growth promoters etc. are used. Accordingly, if the contract given is composite in nature....