[Resolved]  Shriram Properties Bangalore — Excessive VAT & SERVICE TAX

Address:

Bangalore, Karnataka

Shriram properties are charging excessive VAT nd service tax.Rates are as follows for SYMPHONYE PROJECT KANAKPURA ROAD UTTARAHHALI BANGALORE
VAT 13.5% OF (COST OF CONSTRUCTION + CAR PARK+BESCOM AND BWSSB ) + 10.3% (MAITAINENCE OF ONE YEAR + CLUB HOUSE)
SERVICE TAX 4.12% OF 70% (COST OF CONSTRUCTION + CAR PARK+BESCOM AND BWSSB)
BOTH VAT AND SERVICE TAX ARE BEING CHARGED ON BESCOM AND BWSSB.COST OF CONTRUCTION HAS BEEN DECIDED IN THIS ARES AS 1640/SQ FT
I HAVE TRIED MY LEVEL BEST BUT NO SATISFACTORY REPLY BEING GIVEN PL HELP
phone no of GM SALES MRS JAYANTHI [protected]
MARKETING HEAD Mr kulkarni [protected]
Other no [protected]
[protected]
JUSTIFICATION GIVEN BY THEM for VAT nd service tax is as below
VAT ON WORKS CONTRACT

Works Contract

In a sale of flats there is agreement to sell undivided share of land and agreement to build certain flats, The agreements are entered before the completion of the buildings and the monies are collected during the course of construction. Excluding the land component the remaining work is treated as works contract, The highest Court of the land Supreme Court in its landmark judgment put rest all the doubts about the levy of Sales Tax/VAT on the works contract in a famous Raheja’s case. In fact as far as back in 1983 Constitution was amended (46th amendment). Clause 29A was added to Article 366 to cover ‘transfer of property in goods involved in execution of works contracts. Subsequently, most of States have amended their sales tax laws to cover ‘works contract’.

Thus the legislative action of levying of tax was justified by the way of the Constitutional amendment, the final stamp of judicial approval was affixed by way of this famous judgment.

Some relevant definitions under the Karnataka VAT Act are given as under.

(29) ‘Sale’ with all its grammatical variation and cognate expression means every transfer of the property in goods (other than by way of a mortgage, hypothecation, charge or pledge) by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration and includes:-
(a) a transfer otherwise than in pursuance of a contract of property in any goods for cash, deferred payment or other valuable consideration:
(b) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract:
© a delivery of goods on hire purchase or any system of payment by installments:
(d) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration.

(37) ‘Works contract’ includes any agreements for carrying out for cash, deferred payment or other valuable consideration, the building, construction, manufacture.
Processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property.

VAT on BWSSB/BESCOM

The incidence and levy of Tax is governed by Section 3 & 4 and certain modalities are discussed in Section 5 to 14 Section 4 of the Act. In this background we need to understand the implications of levy on BWSSB/BESCOM.

In the case of amounts collected under BWSSB/BESCOM, it shall be noted that it is necessary adjunct of the basic works contracts namely agreement to build. This component has also got all the ingredient of works contract we cannot vivisect these transactions separately from the main works contract and argue otherwise, for the levy of tax on works contract is justified already, Hence the law as applicable to works contract will be applicable to BWSSB and BESCOM mutatis mutandis.

Tax workings – 13.5% of the amount collected as reduced by 30% there of. In other words 13.5% on the 70% of the amounts collected. The 30% abatement is the deemed cost of labor and like costs which is passed onto the customers.

SERVICE TAX ON WORKS CONTRACT

BWSSB/BESCOM

The subject matter of the transactions remains the same and only levy is by another enactment namely service Tax. In as much as the concept of works contract is accepted. Under the Clause Sec.65(105) (zzzza) the subject transaction is taxable. As already seen BWSSB/BESCOM is a necessary adjsunct of the works contract and forms part of the levy. In fact the section provides that the basis is that of the same amount as has been subject to State VAT. Thus the levy of Service Tax on BWSSB/BESCOM is justified.

Tax Workings – 4.12% the amounts collected

Repairs & Maintenance

Management, Maintenance and Repair Services

Under clause 61(105) zzg with effect 01.07.2003, any service provided or to be provided to a customer, by any person in relation to management, maintenance and Repair Services of the immovable property is taxable.

Tax workings – 10.30% the amounts collected

Lt Col Pramod Nath
email [protected]@yahoo.com
oh [protected]