Interstate transaction under Works Contract
nageswararao (Mgr - Commercial) (142 Points)
06 November 2007nageswararao (Mgr - Commercial) (142 Points)
06 November 2007
CA. O.P. Agarwalla
(C.A.)
(2916 Points)
Replied 18 November 2007
Adv. S Sharma
(Lawyer)
(574 Points)
Replied 28 December 2007
CA. O.P. Agarwalla
(C.A.)
(2916 Points)
Replied 02 January 2008
Adv. S Sharma
(Lawyer)
(574 Points)
Replied 02 January 2008
CA. O.P. Agarwalla
(C.A.)
(2916 Points)
Replied 03 January 2008
Adv. S Sharma
(Lawyer)
(574 Points)
Replied 07 January 2008
Hi, I appreciate your knoledge and interest about inter-state works contract. Every thing is ok in your view. procurement of materials in the course of inter-state trade is taxable at alower rate against form C / D. Whether in case of material used in execution of works contract should be supported by form C / D from the contractee. for example "A" places order on "B" for supply and commissioning of material in U.P. "B" Procures materials from "C" at A.P. "B" issued form C for getting material at concessional rate. my question is whether "A" required to give form C to "B" for availing the concessional rate. Originally posted by :Adv. Sachin Sharma |
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" | hi sir there is not any Works Cntract under Inter State Trade which is liable to WCT in State in which WC executed NO STATE CAN LEVY TAX OR CUT TDS ON THE GOODS WHICH ARE IMPORTED (PURCHASED FRM OTHER STATE) AND WHICH ARE USED IN EXCUTION OF WORKS CONTRACT IN THAT STATE. The same issue was considered by the Gujarat High Court in Larsen & Toubro Ltd. Vs. Commissioner of Sales Tax, Gujarat, [2001] 124 STC 162. In this case, Larsen & Toubro undertook to execute a works contract for the installation of a dairy plant in Gujarat, for which it imported goods and machinery from abroad, procured large number of materials from other states, and purchased a very small percentage of the materials in Gujarat. Section 57B of the Gujarat Sales Tax Act, 1969 authorized the employer to collect 2% advance tax at source on the value of the entire bill. The High Court held: “The provisions of section 57-B of the Gujarat Sales Tax Act, 1969 impose an obligation on the employer to deduct 2 per cent of the amount of the bill of the works contractor as sales tax treating the whole of it as sale price and regardless of the nature of the sales and transactions. Such obligation the employer has to discharge in all cases where no certificate of non-deduction from the Commissioner in terms of sub-section (4) to that section is produced. At the time of collection of advance tax on bills, neither employer as payer nor the contractor as payee has any right to make tentative self-assessment of his tax liability. Although, by its definitions of "sale" in section 2(28) and its definition of "sale price" in section 2(29), the Act clearly intends to exclude inter-State sales or outside sales and price representing labour charges in the course of works contracts, these definitions and the provisions of section 87 do not confer legislative competence on the State Legislature to levy and collect sales tax in advance on inter-State sales or outside sales or sales in the course of import only because the contractor fails to produce a certificate from the Commissioner of no deduction of tax at source in accordance with section 57-B(4) of the Act. Section 57-B(4)(a) which imposes an obligation on the employer to deduct 2 per cent of the amount of the bill as tax assuming the works contract to have involved all supplies of material and goods within the State and taxable as such, is an encroachment on the legislative field exclusively assigned to the Union Legislature under entry 92-A of List I of the Seventh Schedule to the Constitution. If the State Legislature has no power to impose tax on inter-State sales or sales in the course of import or outside sales through the amount of bill for works contracts, even machinery provisions cannot be made to collect such tax in advance by assuming all the transactions of sales or supplies to be inter-State sales and taxable in the State. The provisions of section 57-B of the Gujarat Sales Tax Act, 1969 are invalid.” The above judgment of the High Court is in accordance with the law laid down by the Supreme Court in Nathpa Jhakri Jt. Venture v. State of H.P., (2000) 3 SCC 319 wherein the Court had held as follows: “A bare perusal of the two provisions will make it clear that in either provision there is an obligation to deduct from transactions relating to works contract on bills or invoices raised by the works contractor an amount not exceeding 4 per cent or 2 per cent, as the case may be. Though the object of the provision is to meet the tax in respect of the transactions on all works contracts on the valuable consideration payable for the transfer of property in goods involved in the execution of the works contract, the effect of the provision is that irrespective of whether the sales are inter-State sales or outside sales or export sales which are outside the purview of the State Act and those transactions in respect of which no tax can be levied even in terms of the enactment itself such deductions have to be made in the bills or invoices of the contractors. To say that if a person is not liable for payment of tax inasmuch as on completion of the assessment refund can be obtained at a later stage is no solace, as noticed in Bhawani Cotton Mills Ltd. v. State of Punjab. Further, there is no provision for certification of the extent of the deduction that can be made by the authority. Therefore, we must hold that arbitrary and uncanalised powers have been conferred on the person concerned to deduct up to 4 per cent from the sum payable to the works contractor irrespective of whether ultimately the transaction is liable for payment to any sales tax at all. In that view of the matter, we have no hesitation in rejecting the contention advanced on behalf of the State. The above cases reiterate the point that a state is only allowed to tax local sales by way of works contract; inter-State sales by way of works contract or otherwise cannot be the subject matter of a State’s taxing statute. I HOPE NOW ISSUE IS CRYSTAL CLAR |
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we are in business of job work of textiles processing i.e dyeing and printing schedule B of goods of special importance we want to know when the excise duty (AED&BED) is paid on the total job work charges which includes cost of dyes and chemical , fuel, power, cartages , labour, and all other charges and also on the profits the cst on the transfer of property in the work contract will be leived or not
Can you guide me on:-
XYZ based in New Delhi got an order from a PSU YYY in assam for repair of equipment. Repair is to be done by ABC in Uttar Pradesh and ABC will use material for coating etc. (in such case usually value of material is less then 20% of contract price). YYY will send equipment directly to ABC in UP and ABC will send the goods back directly to YYY in Assam. XYZ will only supervise the job as technology belong to them and XYZ does not have any facility in India.
In such a case what will be treatment of Works contract tax and service tax.
CA. O.P. Agarwalla
(C.A.)
(2916 Points)
Replied 16 September 2008
Originally posted by :Guest | ||
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we are in business of job work of textiles processing i.e dyeing and printing schedule B of goods of special importance we want to know when the excise duty (AED&BED) is paid on the total job work charges which includes cost of dyes and chemical , fuel, power, cartages , labour, and all other charges and also on the profits the cst on the transfer of property in the work contract will be leived or not 01. There must be a inter-state sale and goods must be moved to some other state. 02. There must be a sale (may be a deemed one, i.e. transfer of property in goods). Regarding first criteria you are clear that the transaction is a inter state one. Regarding second that, whether transfer of property has been made or not in course of dying and printing. Though there is a conflict about the concept of materiality test, there are few high court decisions in which it was held that in yours type of cases poperty of ink etc. are being transferred.Hence these are works contract and CST seems to be leviable on the taxable value of the contract. |
" |
CA. O.P. Agarwalla
(C.A.)
(2916 Points)
Replied 16 September 2008
Originally posted by :Guest | ||
" |
we are in business of job work of textiles processing i.e dyeing and printing schedule B of goods of special importance we want to know when the excise duty (AED&BED) is paid on the total job work charges which includes cost of dyes and chemical , fuel, power, cartages , labour, and all other charges and also on the profits the cst on the transfer of property in the work contract will be leived or not 01. There must be a inter-state sale and goods must be moved to some other state. 02. There must be a sale (may be a deemed one, i.e. transfer of property in goods). Regarding first criteria you are clear that the transaction is a inter state one. Regarding second that, whether transfer of property has been made or not in course of dying and printing. Though there is a conflict about the concept of materiality test, there are few high court decisions in which it was held that in yours type of cases poperty of ink etc. are being transferred.Hence these are works contract and CST seems to be leviable on the taxable value of the contract. |
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