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Double Taxation

AOJSM (Student) (93 Points)

15 June 2009

hello,

I need a clarification on VAT calculation. I got a house constructed, and the builder(registered dealer of vat) is charging/calculating Service Tax on the total consideration, and then finally adding the Service Tax amount to the total consideration and then calculating VAT on the new figure (Total Consideration+ServTax), is this correct??? I inquired with the CTO and they say that the dealer is correct in calculating VAT on (Total Consid+ST).

If what they say is correct, then is it not DOUBLE TAXATION? The governments intentions are to lessen the burden on tax payers, and not tax them heavily. So can anyone enlighten me on this issue?? Also is there any online material to study & to understand VAT answering my points asked above?

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4 Replies

aniket (Accountant) (561 Points)
Replied 15 June 2009

He is correct and VAT is applicable on Excise also

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AOJSM (Student) (93 Points)
Replied 16 June 2009

thanks aniket. ur reply is concise, very concise.

Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 17 June 2009

The view is that service tax is charged earlier and on that the VAT is chargeable. I have a different view on the same subject.

In case of a works contract the taxable event of provding of the service happenns along with the transfer of materials. Example could be when a brick is laid labour as well as materials are involved at the SAME time. Since these activities are simulatanous netiher ST on VAT nor VAT on ST is liable.

In fact from the point of ST on VAT the notification issued for ST on works contract clearly specifies that ST should not be charged on VAT.

AOJSM (Student) (93 Points)
Replied 17 June 2009

hello, can u give me a copy or some link where it is available regards the notification issued as u mentioned in your reply. It would be of great help if i can peruse it too. also there is so much of ambiguity in the VAT Acts, that the dealer can take the context out of meaning and come out unscathed. if the government wants or feels that the act has to be implemented then they as well straight away say that the end user has to pay VAT, no matter what at this rate as prescribed by govt. instead of beating around the bush. thanks.

Originally posted by :Madhukar N Hiregange
"	The view is that service tax is charged earlier and on that the VAT is chargeable. I have a different view on the same subject. In case of a works contract the taxable event of provding of the service happenns along with the transfer of materials. Example could be when a brick is laid labour as well as materials are involved at the SAME time. Since these activities are simulatanous netiher ST on VAT nor VAT on ST is liable. In fact from the point of ST on VAT the notification issued for ST on works contract clearly specifies that ST should not be charged on VAT.	"