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(1) Notification No 06/2014- ST amended the following provision of Mega Exemption Notification 25/2012  ( w.e.f.       11-07-2014)
(*) Services provided to Government, a local authority or a governmental authority by way of water supply, public         health, sanitation conservancy, solid waste management or slum improvement and up-gradation., now the word       carrying out any activity in relation to any function ordinarily entrusted to a municipality is omitted.

(2) Notification No 08/2014- ST amended the following provision of Abatement Notification 26/2012
(*) Transport of Goods by Vessel is now liable on 40% value of service, i.e. abatement is increased from 50% to 60% of value of service.

(3) Notification No 09/2014- ST amended the provision of Service Tax Rules, 1994
(*) Every assessee shall electronically pay the service tax payable by him, through internet banking irrespective of the amount of service tax paid during the preceding year (earlier it was Rs 1 lac ). (w.e.f. 1/10/2014)

(4) Notification No 10/2014 – ST amended the provision of provision of Notification No . 30/2012 related to Reverse Charge Mechanism (w.e.f. 11/07/2014)
(*) Service Provided or agreed to be provided by a recovery agent to a banking company, financial institution or NBFC, service tax to be payable by such service receiver.
(*) Service Provided or agreed to be provided by a director to company or body corporate. ( Body corporate has been inserted in earlier provision ).
(*) In case of Renting of Motor Vehicle designed to carry passengers on non abated value to any person who is not engaged in the similar line of business ratio is streamline to provide 50% for Service Provider and Receiver.

(5) Notification No 11/2014- ST provided in case of works contract for original works taxable portion is 40% of value and for remaining it is 70% of value of service. So now no bifurcation of 60% and 70% of value of service for B and C category.(w.e.f. 01/10/2014)

(6) Notification No 12/2014- ST amended the provision of Section 75 of the finance Act to provide the interest rate of following manner (w.e.f. 01/10/2014):-

S. No.

Period of delay

Rate of interest

1.

Up to six months

18%

2.

More than six months and up to one year

18% for first six month of delay and 24% for beyond six month

3.

More than one year

18% for first six month of delay, 24% for beyond six month and 30% for delay beyond one year

Note: A Concession of 3% on the above applicable rate of interest will be available to small service providers having turnover of less than Rs. 60 Lakhs

(7) Notification No. 13/2014- ST amended the provision of Rule 7 of Point of taxation Rules, 2011 to provide that point of taxation in case of reverse charge will be the Payment date of invoice or first day after 3 months from the date of invoice , whichever is earlier. ( w.e.f. 01/10/2014)

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45

Posted by on in Service Tax
The main thrust of the arguments of the learned Solicitor General before us was that the price for the sale of CKD packs by the foreign collaborator to the respondents is not the true price. In other words, the price fixed or mentioned in the invoices was not the sole consideration for the sale of CKD packs, for the various reasons stated by the Assistant Collector in his order. According to the learned Solicitor General, the price mentioned in the invoices was (or should have been) determined by taking into consideration the lumpsum of 15 million French Frances (nearly three crores of Rupees) paid by the respondents to the foreign collaborator under the agreement. It is on this basis Section 14(1)(a) was excluded and resort to Section 14(1)(b) of the Customs Act was sought to be justified by the revenue. In appreciating the above plea the court have to bear in mind certain basic principles. The bargain between the respondents and the foreign collaborator is evidenced by written agreements, (dated 6-11-1979 & 6-3-1980). There is no material nor was it suggested that the dealings between the parties are not at arm's length. No evidence is available to show that the payment of royalty to the collaborator induced any extra commercial obligation for the price of CKD packs, parts and components. Ordinarily the Court should proceed on the basis that the apparent tenor of the agreements reflect the real state of affairs. It is, no doubt, open to the revenue to allege and prove that the apparent is not the real and that the price for the sale of th e CKD packs is not the true price, and the price was determined by reckoning or taking into consideration the lumpsum payment made under the collaroration agreement in the sum of 15 million French Frances. The short question is whether the revenue has succeeded in showing that the apparent is not the real and that the price shown in the invoices does not reflect the true sale price an so Section 14(1)(b) of the Act was properly invoked.
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41

Posted by on in VAT
Extended assessment period for construction-dealers continues

Maharashtra Govt notifies Maharashtra VAT (Amendment) Act 2014 w.e.f. March 2014 replacing Maharashtra VAT (Amendment) Ordinance 2014; Amendment to Sec 23 of MVAT Act extending limitation period for assessment of dealers constructing flats, buildings, premises to September 30, 2015 continues : Maharashtra Govt Notification
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23
Tax exemption available u/s 5(3) of Central Sales Tax (CST) Act against sale of goods subsequently exported in different form; As per test laid down by SC Constitution Bench in Azad Coach Builders Pvt Ltd, there must be in-severable link between local sale / purchase and export and if it’s clear that same are inextricably linked, Sec 5(3) benefit available; The phrase 'in the course of export' comprises in itself three essentials, viz., (i) there must be sale, (ii) goods must actually be exported and (iii) sale must be part and parcel of the export; Since Tribunal failed to consider law laid down by apex court Constitution Bench, remands matter to decide assessee’s appeal afresh  : Allahabad HC
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15

 

2014-VIL-177-TRI
SRI BIPLAB KR. GHOSH & M/s L.K. BUILDERS Vs THE UNION OF INDIA & THE STATE OF TRIPURA

 

Tripura High Court: Tripura Value Added Tax Act, 2004 – Central Sales Tax Act - Work Contract – Inter-state sales – Turnover - Methodology in determining the taxable turnover at the stage of deduction under section 4(3) – Freight -Constitutional validity of certain provisions, specially which are applicable in respect of works contract, of the Tripura Value Added Tax Act and Tripura VAT Rules - Contentions of the appellant based on the judgment of the apex court in Gannon Dunkerley [1992] case - Interpretation of statutes – HELD – If the entire Act is read as a whole, then it is more than apparent that the Legislature has, in fact, been extra careful that it does not impose tax on any sales not falling within its jurisdiction and thus, it has excluded those sales both under section 5(2) and under section 41 - The provisions of the Tripura Value Added Tax Act are within the legislative competence of the State - No merit in the contention of the petitioners that the provisions of the TVAT Act or the Rules are in any way invalid or unconstitutional - The only directions which we would like to issue are that the assessing officer while considering the value of the transfer of property in goods in a works contract and while calculating the taxable turnover must allow all deductions which flow from the judgment in Gannon Dunkerley case and that rule 7A of the TVAT Rules shall be prospective in nature and will not have retrospective effect – Assessee appeal dismissed with exemplary cost

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51
Gujarat State VAT Budget Proposals affecting the construction sector :-

1. Rate of Stamp duty on development Agreement increased from 1% to 3.5% and on transfer of immovable property as capital contribution by the partner introduced at 3.5% from existing Rs. 10K.

2. According to the recent judgement of Hon. Supreme Court, certain transactions of the developer and civil contractor become taxable as works contract. There is already a provision in the Gujarat Value Added Tax Act, 2003 to levy lump sum tax at the rate of 0.6% for such works contracts. But in absence of legal clarity, some contractors have not paid the tax. Now, since there is full clarity, in order that such contractors be able to make the payment of tax retrospectively, the State Government has decided to announce a scheme for this purpose. Under the scheme, if the registered as well as the unregistered dealers engaged only in civil works contract, makes the payment of due tax retrospectively at the rate of 0.6% for the past years, a scheme for remission of the interest and penalty will be implemented. The scheme shall remain in operation for 180 days from the date of announcement. A detailed scheme in this regard will be declared hereafter.
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39

Posted by on in Service Tax

Article Series – How free is the free issue

Taxability of free Issue Material has been a very controversial issue especially in the service tax regime. Earlier under the erstwhile positive list era of service tax, where the construction sector enjoyed the benefit of 67:33 rule, the service providers started planning the transactions in a way that the major purchases were being shifted to the client account. This was with a view to reduce the impact of service tax on the activity. To plug the said loophole, department amended the notification so as to say that even if the client to whom the services are being rendered provides certain materials free of cost, the same would form part of the gross value of the consideration only for the purpose of calculation of service tax under the abatement scheme.

Now since the amendments under the act was made applicable immediately instead of only for the fresh contracts entered into after the amendment, all the contractors whose contracts were already under progress started facing the wrath of this notification from their clientele. This was so as no client was willing to reimburse the extra component of service tax on the free issue material by strictly interpreting the clauses of the agreement which in several cases were in their favour.

Thus several big contractors like L&T, Nagarjuna, Jaihind Projects etc, were not left with an option but to raise their voice against the department’s action of raising demands on the value of free issue material incorporated in their contracts. They thus decided to appeal. Although they were bound to loose at the first appellate forum knows for its biased attitude when it comes to protecting the government revenue, forgetting their quasi judicial responsibility. Interestingly the matters started receiving different interpretations by the difference benches of CESTAT. The president of CESTAT was thus not left with any option but to constitute a higher bench to resolve the matter and preserve the dignity of this forum. Finally the three judge bench of CESTAT in the case of Bhayana Builders delivered a thumping verdict in the favour of the assessee. The verdict was thumping as the judgement had read down the notification bringing in a mechanism to add value of free issue material by interpreting the same as against the principles laid down under Section 67 of the Finance Act, 1994. This truly is the characteristic of our legal hierarchy where Constitution is at the top, act comes second the rules are even below the acts. So unlike in the real life, here a child can-not go against his own father.

Now the moot question that arose was whether this judgement would even apply to the post negative list regime which now had a new rule mechanism for works contracts under Rule 2A of the Service Tax (Determination of Value) Rules, 2006 , but with the same Section 67 in place.

Well we as professionals may normally tend to have a very protective attitude towards our clients and may thus not advice them to follow this judgement, for some of these reasons :-

  • It is a judgement of Tribunal which can be run down by high court or Supreme court in the future.
  • With new rule framework in place, which is now using different set of words, it will again be a battle of sorts to convince the lower authorities
  • Even on the principles of equity, it seems fine to add the value of free supplies in determining the service tax liability.
However, I am sure that some of our professional brothers, would like to take this gamble by advicing their clients not to pay any service tax on value of free issue supplies as the act and in particular Section 67 has remained the same even now.
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47
State of Karnataka
Vs.
Reddy Structure (P.) Ltd.


1. Heard learned counsel for the parties. These revision petitions are placed before us for admission. By consent, they are heard for final disposal at this stage. Learned Senior Counsel appearing for the respondent at the outset invites our attention to the recent judgment of the Supreme Court in Larsen & Toubro Ltd. v. State of Karnataka MANU/SC/0985/2013MANU/SC/0985/2013 : [2013] 38 taxmann.com 98 : 41 STT 113 and submitted that the question raised in these petitions is squarely covered by the said judgment.

2. Having confronted with this, learned counsel appearing for the petitioner does not dispute the submission advanced by learned senior Counsel for the respondent.

3. According to the learned senior Counsel for the respondent, only the following (the first) question arise for our consideration. Learned counsel for the petitioner fairly states that other two questions, as framed in the memorandum of petitions, are just a repetition of the first question and they need not be considered independently. The first question reads thus:--

(1) Whether on the facts and in the circumstances of the case and in law the Tribunal is justified in giving a finding that deducting the value of land from the total receipt of the builder is impermissible, but only value of the transfer of property in goods has to be considered for the purpose of assessment by adding G.P., as the same is against provisions of law?

In short, the question that falls for our consideration is whether the land value should form part of taxable value for levy of V.A.T. or Sales Tax?

4. We have perused the judgment of the Supreme Court in Larsen & Toubro Ltd. (supra). It would be advantageous to reproduce the relevant portion of paragraph 100 of the said report, which reads thus:

100. We have no doubt that the State Legislatures lack legislative power to levy tax on the transfer of immovable property under Entry 54 of List II of the Seventh Schedule. However, the States do have competence to levy sales tax on the sale of goods in an agreement of sale of flat which also has a component of a deemed sale of goods. Aspects theory though does not allow the State Legislature to entrench upon the Union List and tax services by including the cost of such service in the value of goods but that does not detract the State to tax the sale of goods element involved in the execution of works contract in a composite contract like contract for construction of building and sale of a flat therein.

The Supreme Court further in paragraph 101 of the report summarized the legal position. For our purpose, sub-para (xi) of paragraph 101 is relevant, which reads thus:

(xi) Taxing the sale of goods element in a works contract under Article 366(29A)(b) read with Entry 54 List II is permissible even after incorporation of goods provided tax is directed to the value of goods and does not purport to tax the transfer of immovable property. The value of the goods which can constitute the measure for the levy of the tax has to be the value of the goods at the time of incorporation of the goods in works even though property passes as between the developer and the flat purchaser after incorporation of goods.

5. From bare perusal of the observations made by the Supreme Court in paragraph-100 and the conclusion drawn in sub-paragraph (xi) of para-101, it is clear answer to the question raised in the revision petitions. We do find ourselves in agreement with learned senior Counsel for the respondent that the question raised in these revision petitions is squarely covered by the judgment of the Supreme Court in Larsen & Toubro Ltd. (supra). Learned counsel for the petitioner does not dispute this legal position. Hence we answer the substantial question of law in favour of assessee and against the Revenue.

6. Before we part, we record the statement of learned senior Counsel for the respondent, made on instructions from his client who is present in the Court, that the respondent-developer has paid V.A.T./Sales Tax on the entire material cost that was used for construction of the building and in the present case, the only question is deduction of land cost. His statement is accepted and record. It is open to the petitioner, if they find it necessary to verify correctness of the statement and if they find it incorrect, they may take appropriate steps against the assessee in accordance with law. With these observations, this group of sales tax revision petitions is disposed of. No costs.

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13

HC clarifies on taxability of development of residential complex activity under Uttarakhand VAT Act; ‘Sale of goods’ being sine qua non for applicability of Act, includes agreement for carrying out construction / commissioning of any immovable property; VAT applicable when person agreeing to undertake construction sells the construction as 'goods' covered by the Act, but if he sells immovable property after construction, no sale of goods takes place; Provisions of Act attract as soon as property in goods is transferred by way of sale, and tax becomes leviable; Remits back matter to Commissioner to decide issue after determining object of assessee’s business, viz., sale of immovable property as flats, apartments or construction of same on behalf of other : Uttarakhand HC

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49

M/s Hindustan Steel Works Construction Ltd Vs CCE

ST - Value of goods and materials supplied free of cost by a service recipient to the provider of the taxable construction service would be outside the taxable value or the gross amount charged - matter no longer res integra - Appeal allowed: CESTAT - Appeal allowed : DELHI CESTAT

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47

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