Recent Developments in KVAT and Precautions to be taken ......2014/11/16 · luxury trains, bars &...
Transcript of Recent Developments in KVAT and Precautions to be taken ......2014/11/16 · luxury trains, bars &...
CA S. Venkataramani
16.11.2014
Recent Developments in KVAT
and Precautions to be taken by CAs
Tax Rates
Tax at 5.50% is introduced on sale of liquor (including beer, wine, etc.)
w.e.f 01-03-2014 w.e.f 21-04-2014 Exempt
CL-9 (bars & restaurants in urban areas)
CL-7C / CL-14 / CL-15 (liquor served by KSTDC / ITDC on luxury trains, bars & restaurants )
CL-2 (Retail license)
CL-4 (Clubs) CL-17 (Bar & restaurant at international airport catering to all travelers)
CL-9 (Bar and restaurant in rural areas)
Cl-6A (Star Hotels) CL-18 (Bar & restaurant at international airport catering specifically to international travelers)
CL-11C (retail license issued to government companies)
CL-7 (Lodging Houses) Form II beer bar license LFW-III (Wine tavern / boutique)
Notification II No. FD 21 CSL 2014 dated 28-02-2012 r/w Notification No FD 41 CSL 2014 dated 21-04-2014
Tax Rates - Issues
What is urban area?
The term urban area has not been defined under the Act. However,
Notification II of FD 21 CSL 2014 dated 28.02.2014, refers to the areas
falling under BBMP, city municipal corporation, city municipal council
and the town municipal council or town panchayat.
Whether tax is applicable on sale / distribution by KSBCL?
No. As KSBCL is a government company holding CL-11 license, they are
exempt from payment of tax.
Whether a restaurant serving liquor can opt for payment of tax under
composition scheme?
No. Rule 135(4) of the KVAT Rules, prohibits a dealer selling liquor from
opting to pay tax by way of the composition scheme.
Tax Rates - Issues
Assume, a dealer M/s ABC holding a CL-9 license sub-leases the
said license to say M/s XYZ. What are the tax implications assuming
M/s ABC is not registered?
In Karnataka, all purchases of liquor are routed through KSBCL. Thus,
KSBCL will raise an invoice in the name of M/s ABC. This is because in
the eyes of KSBCL, M/s ABC is still the holder of the said license even
though such license has been sub-leased to M/s XYZ. Further, the
manufacturer of liquor will also raise an invoice in the name of M/s ABC
quoting the TIN of M/s XYZ since M/s ABC is not registered. M/s ABC is
thus required to raise an invoice in the name of M/s XYZ. The question of
payment of taxes on transfer of liquor by M/s ABC to M/s XYZ does not
arise since M/s ABC acts only as a conduit in the entire scheme of
transactions and not as a seller.
Tax Rates - Issues
In the event the tax department litigates the issue on the ground that there is
really a sale in the hands of M/s ABC the only option would be to litigate the
matter on the ground that since the only CL 9 License that he holds being
transferred to M/s XYZ there can, in effect, be no transaction of sale, since he
can no longer run a bar and restaurant in the absence of the said License.
It must be noted that, M/s ABC is liable to pay taxes at the rate of 5.50%, on
the sub-lease of the CL-9 license to M/s XYZ, in terms of entry 34 of the
Third Schedule to the KVAT Act, 2003
Returns
Suitable administrative measures provided for rectification of
mistakes in the returns filed, where such rectification will not have
any tax implication.
A new subsection (5) has been inserted in Section 31, which requires
every registered dealer to file an annual statement (which will be in
addition to the monthly returns) in order to avoid disputes in the
information provided by dealers in the electronic returns.
Returns - Issues
Rectification which does not have any tax implications-Means?
It means, rectifying returns as result of omitting / including those
transactions which have no effect on the quantum of taxes payable /
refundable including input tax credit. In other words inter-state purchases,
stock transfer, etc.,. (Refer para 8 of Circular 12/2014-15 dated 16.08.2014)
What are the procedures to be followed for rectifying such mistakes?
The Commissioner of Commercial taxes has issued a circular No 12 / 2014-
15 dated 16-08-2014 prescribing the procedure to rectify such mistakes
having no tax implication.
Whether revised returns should be filed for such rectification?
No. It is not necessary to file revised returns. The relevant box can be
specifically accessed on the Departmental website.
Returns - Issues
Does the Act prescribe any time limit for such rectification?
No time limit has been prescribed under the Circular.
What is the form notified for the purpose of the annual statement?
No form has been prescribed till date.
What is the due date for filing the same?
No due date has been prescribed till date.
In case of differences between the monthly return and the annual
statement, what is the course of action?
Since no procedures or forms are prescribed in respect of annual statements
no corrective action can be taken. However, such differences shall be
incorporated in the Form VAT 240.
Returns – Issues… Whether taxes remitted short can be paid along with the annual
statement?
Generally Yes
Whether unclaimed input taxes can be declared and claimed in the
annual return?
Generally Yes
Is the annual statement a substitute for the Form VAT 240? If not, do both
the statements have to be filed?
The annual return may not be a substitute for Form VAT 240. Thus, both
annual return and Form VAT 240 have to be filed.
Whether the VAT Auditor should verify the annual statement and
comment on the same for the purpose of Form VAT 240?
No
Section 63 of the KVAT Act, 2003 has been amended to provide that a
single appeal may be preferred before the Tribunal for the year as a
whole against orders of assessment or re-assessment passed by the
First Appellant Authority, instead of filing appeals for each of the
month.
What is meant by second appeal?
Appeal before the KAT
Whether, this amendment is applicable to second appeal before JCCT
(Appeals )?
No.
Appeals & Issues
Penalty
A proviso to Section 72(1) of the KVAT Act, 2003 has been inserted to
provide that no penalty shall be payable, for failure to furnish a
return for any tax period, by a dealer who is not liable to get himself
registered and who is also not liable to pay any tax for such tax
period, if he makes an application for cancellation of his certificate of
registration.
Download - Form C / Form F
The Department of Commercial Taxes, Karnataka has issued Circular
No.12/2014-15, dated 16.08.2014 with regard to the procedure to
download declaration in Form C / F where the dealer had failed to
declare / wrongly declared the relevant inter-State purchase/ stock
transfers in the monthly return in Form VAT 100..
Auto Generation - Form C
The Department of Commercial Taxes, Karnataka has prescribed the
procedure for auto-generation of declarations in Form Cs
(electronically) for the quarter ending 30.06.2014 and onwards. The
procedure is contained in Notification No.CCW/CR.8/2013-14,
dated 09.09.2014.
All registered dealers will be eligible for this facility for inter-State
purchases effected on / after 01.04.2014.
Auto Generation - Form C - Issues
In case of a dealer, whose annual turnover is less than the minimum
prescribed for uploading of purchases and sales, is it sufficient to
only upload the details of inter-state purchase for the limited
purpose of generating Form C?
Yes. It is sufficient to only upload the details of inter-state purchase for the
limited purpose of generating Form C.
Inter-State purchase against form C – invoice is accounted in
subsequent months – whether Form C can be generated?
The Commissioner vide Circular 12/2014-15 dated 16.08.2014 has clarified
that Form C can be generated for the tax period pertaining to the invoice
date.
Auto Generation - Form C – Issues…
Form C generated with incorrect details – what is the course of
action?
In case Form C generated is incorrect or incomplete for any reasons, the
dealer is required to apply in writing for cancellation of the same with the
concerned LVO/VSO and also submit such Form C along with the written
request. Additionally, an undertaking is to be filed to the effect that the
selling dealer of the other State has not submitted the said declaration in
Form C and has not claimed the concessional rate of tax.
Whether after generation of Form C, the dealer can file revised return
for the period to which such Form C pertains to?
No. Once Form Cs are generated, the dealer is not permitted to make
changed in the value declared in the monthly returns.
E-Upass
The Department of Commercial Taxes, Karnataka has issued
Notification No: CCW/CR44/2013-14 dated 29-04-2014 with regard
to furnishing of details in respect of purchases, sales and receipt /
despatch of goods otherwise than by way of purchase/sales (i.e.
stock transfer) electronically. This would be effective immediately
commencing from the tax period May, 2014 for all those dealers
whose total turnover is Rs. 50 lakhs or more.
E-Upass – Issues
The procedure for uploading the details of purchases and sales is
mandatory to all the registered dealers?
It is mandatory only for those dealers who annual turnover exceeds Rs. 50
lakhs. It is also mandatory for those dealers who intend to generate Form C.
What is the procedure to upload details of E1 sales?
In the current scenario, there is no facility to upload details of E1 sales.
Whether the details of purchase / sales should be uploaded prior to
filing of returns?
There is no specific order prescribed for filing details of purchase / sales.
Thus, details of purchase / sales may be uploaded prior to filing of returns.
E-Upass – Issues…
What is the due date for uploading the details of purchase / sales?
The details of purchase / details must be uploaded within the 20th of each tax
period.
What are the consequences for not complying with the uploading of
details of purchases and sales?
In case of dealers who are required to upload the relevant details and who
are not complying with the same, generation of declaration in relevant
forms viz, C, F, H, etc. will not be possible. The Department has also
cautioned the dealers that there will strong measures to ensure compliance
of the same which may include blocking of access to file the necessary
monthly returns in Form VAT 100.
E-Upass – Issues…
Whether uploading of purchase and sales details is with reference to
generation of statutory forms only? Does it have any impact on
claiming of ITC by the dealers on local purchases?
The input tax credit uploaded along with the details of purchases should
match with input tax credit as declared in the returns.
Larsen & Toubro (65 VST 1) The Larger Bench of the Hon’ble Supreme Court (three member Bench)
on 26.09.2013 delivered a landmark decision in the case of Larsen &
Toubro Vs State of Karnataka (65 VST 1) approving the decision of the
Supreme Court in the case of K. Raheja Development Corporation and
others (141 STC 298) on the question relating to applicability and levy of
sales tax / works contract tax on contracts involving construction / sale
of residential apartments.
Three conditions must be satisfied for levy of tax on goods deemed to
have been sold under a works contract (i) there must be a works contract,
(ii) goods should have been involved in the execution of a works contract
and (iii) the property in those goods must be transferred to a third party
either as goods or in some other form. If the developer has received or is
entitled to receive valuable consideration, the above three things are fully
met.
Larsen & Toubro (65 VST 1) contd..
The activity of construction would be a works contract only from the
stage the developer enters into a contract with the flat purchaser. The
value addition made to the goods transferred after the agreement can
only be made chargeable to tax by the State.
Even if the dominant intention of the contract is not to transfer the
property in goods and rather it is rendering of service or the ultimate
transaction is transfer of immovable property, tax may be levied on the
materials used in such contract if such contract otherwise has elements of
works contract.
Taxing the sale of goods element in a works contract 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.
Larsen & Toubro (65 VST 1) contd..
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.
The label of payment is not decisive but the factum of payment is
Where a contract comprises of both - a works contract and a transfer of
immovable property, such contract does not denude it of its character as
works contract.
Larsen & Toubro (65 VST 1) contd..
In the development agreement between the owner of the land and the
developer, direct monetary consideration may not be involved but such
agreement cannot be seen in isolation to the terms contained therein and
following development agreement, the agreement in the nature of the
tripartite agreement between the owner of the land, the developer and
the flat purchaser where under the developer has undertaken to
construct for the flat purchaser for monetary consideration. Seen thus,
there is nothing wrong if the transaction is treated as a composite
contract comprising of both a works contract and a transfer of immovable
property and levy sales tax on the value of material involved in execution
of works contract.
L & T Ltd - Issues
► Would the judgement be applicable only for the parties thereto or would
it be applicable to all?
The judgement of the Larger Bench of the Honourable Supreme Court would be
applicable to all dealers in the country (registered or unregistered) who have
executed any works contract in the nature of construction and sale of residential /
commercial / any other structures.
► Would the ratio of this judgement be applicable for computation of
service tax?
The ratio of judgment in my view would be applicable for the services classified as
“works contract” and cannot be made applicable to the transactions classified as
construction of residential complex services.
L & T Ltd - Issues
► What would be the implications if the flat purchaser only books the flat
but does not pay any instalments after that?
The value of works which is executed after the date of the said „agreement to sell‟
would be liable to tax as works contract – irrespective of whether or not the flat
purchaser pays the instalments.
► What would be the implications if only the booking advance is received
and the agreement to sell is not entered into, subsequently?
The transaction would attain the characteristic of a works contract only at the
time when the „agreement to sell‟ is entered into – till such time the agreement is
entered into, the amount received merely represents a willingness to enter into a
contract with the developers. This, in my view, would not qualify as „sale‟ or as
„advance for execution of works contract‟.
L & T Ltd - Issues
► What are the implications where the builder has raised a demand note
but the money is not received / is received in subsequent tax periods?
„Taxable turnover of works contracts‟ would be the value of works done during
the relevant tax period/s and not merely the receipt of monies from the flat
purchasers
► What are the factors for distinguishing a works contract with a sale
simplicitor? Should substance of the transaction be overlooked?
On fulfilling the three conditions as specified in para 101 of the judgment viz.,
- There must be a works contract
- There must be goods which are involved in the execution of the works contract
- The property in such goods should be transferred to the customer – whether in
the same form or in some other form
► In a JDA, can it be said that the ownership / property in the unsold units
gets transferred to the land owner?
In my considered view, such transactions cannot be considered as taxable since
they do not envisage monetary consideration which is a pre-requisite to fall
within the definition of the word “sale”.
► The judgement indicates that the value to be taxed is ‘value of goods at
the time of their incorporation into the works contract’ – this is indicative
of purchase method of valuation – this is not prescribed / provided in
law – what could be the implications if this method is adopted?
The purchase method of ascertaining the value of goods used in the execution of
works contract is not prescribed / provided in law.
L & T Ltd – Issues…
► In a case where the agreement to sell is entered into in the course of
construction – but the full consideration is received only after the
construction is complete – what would be the implications?
In my view, once the agreement to sell is entered into with the flat purchaser, the
total construction value of the contract attributable to the work which is executed
after the date of the said „agreement to sell‟ would be liable to tax as works
contract
L & T Ltd – Issues…
► The substance of the transaction and the time of transfer of property
appears to have been overlooked in the judgement – does it mean that
contract for manufacture of customized goods and sale thereafter would
now be works contracts – or would they continue to be sale simplicitor?
If a transaction satisfies 3 conditions as stated in para 101 of the judgment and
the developer has received or is entitled to receive a valuable consideration, the
transaction is a works contract
L & T Ltd – Issues…
► The SC states that – ‘the value addition made to the goods transferred after the
agreement is entered into with the flat purchaser can only be made chargeable to
tax by the State Government (Para 115 of the judgement)’ – what would be
the implications in respect of goods which have already been
incorporated into the construction but value addition to it takes place
after the contract?
It would be appropriate and reasonable to determine the proportion of the work
done for each of the towers, as may be feasible, based on certificates of work
completed from third parties. This would mean that for all the flats / units sold
during the month, the portion of work completed upto the end of the previous
month could be reckoned as „work completed upto the date of the agreement with
the customer‟.
L & T Ltd – Issues…
► How to compute the net tax payable on a sale of flat? Illustration
► Contracts are entered into with the customers throughout the life cycle of
the project – at what stages would regular scheme and composition
scheme be beneficial?
The decision on the type of registration to be sought is dependent on the various
factors. Such factors should be simulated in respect of each case to compute the
effective rate of tax on a project prior to decision making.
► What is the impact on the JDAs? Would the land owner’s share now be
liable to VAT?
In our view, the judgement in the case of L&T would not impact the position on
taxability of the exchange of land and constructed portion between the land owner
and the developer - barter.
L & T Ltd – Issues…
► What happens in the event, a flat for which an agreement to sell has been
entered into is subsequently cancelled / surrendered?
In my view, the same would tantamount to a „sales return‟. Subject to the
condition that the same is done within 6 months from the date of entering into
the agreement to sell, the output taxes paid and deductions and input taxes
claimed would have to be reversed.
► What are the implications in case of transfer / exchange of flat – where
the flat purchaser changes the flat?
Taking cognizance of the fact that the customer had already entered into an
agreement to sell originally and it is only a case of transfer / shift from one unit
to another, in my view, reversal / re-credit, as the case may be of the taxes and
deductions would not be required.
L & T Ltd – Issues…
► What are the implications in case of assignment of the flat – where the
original flat purchaser assigns the relevant flat to another person for a price –
the builder would normally be a confirming party to such contracts?
From a VAT perspective, assignment of an agreement to sell by the original customer
in favour of another person would not have any implications, meaning the works
contract portion originally ascertained, if any, would remain unaltered.
► How should tax be computed where the complete flat value is received in
advance by the builder?
In my view, once the agreement to sell is entered into with the flat purchaser, the total
construction value of the contract attributable to the work which is executed after the
date of the said „agreement to sell‟ would be liable to tax as works contract –
irrespective of when the flat purchaser pays the consideration.
L & T Ltd – Issues…
► Where the returns were filed as ‘nil returns’ on the premise that the sale of
flat is sale of immovable property – would the penalty under Section 72(2)
still be payable?
In my view, penalty provision would be invoked and would be applicable in all
cases where the dealers had in the earlier tax period/s filed „nil returns‟ on the
premise that the sale of flat is one of sale of immovable property.
► Where the returns were filed as ‘nil returns’ on the premise that the sale of
flat is sale of immovable property – would interest be payable for the delay
in payment of net tax?
In my view, delay in payment of tax is mandatorily liable for payment of interest at
prescribed rate/s for the period of delay.
L & T Ltd – Issues…
► In terms of the SC ruling, work completed upto the date of the agreement
would not be liable to tax – however, where the builders have collected
and remitted taxes even on such portion of the construction value – what
would be the implications – forfeiture and penalties?
The tax collected in excess from each customer should be computed and intimate
the flat owners individually who can thereafter file an application in Form VAT
260 before the Honourable Commissioner of Commercial Taxes for refund of
such excess taxes collected by the developer and remitted to the State
Government.
L & T Ltd – Issues…
► In the normal course, builders make inter-State purchases against Form C
– however, to the extent the flats remain unsold and to the extent of work
completed upto the date of the agreement, the SC has ruled that the same
would not be liable to tax – in such circumstances, would this amount to
mis-use of Form C? What would be the implications?
In my view, this would be a matter of litigation and would have to be contested.
► Where approximate taxes have been collected and deposited into Escrow
/ FDs, can the amounts now be transferred into current accounts?
In this scenario the question of tax payable versus excess tax collected needs to
worked out and the balance will have to be deposited in the State treasury which
will ultimately stand forfeited under Section 47 of the KVAT act, 2003.
L & T Ltd – Issues…
► Where no taxes have been collected from the customers – based on this
agreement, can taxes now be collected?
In my personal view the developer would not be in a position to collect taxes in
cases where the properties are already registered with the sub registrar.
► How to establish the amount of work completed for each tax period?
Should it be for each flat or for each tower or for each project?
The Law does not stipulate method to ascertain the same.
► Is there any communication / correspondence to the exchanged with the
customers?
The VAT laws or the judgement by itself does not provide for any
communication / correspondence to the exchanged with the customers.
L & T Ltd – Issues…
► Should the deductions and credits be reversed at the end of each tax
period to the extent it relates to unsold flats?
Taking cognizance of the Supreme Court Ruling, the work done upto the date of
the agreement would not be liable to tax. Accordingly, it follows that the (i)
deductions (labour and other like charges and the sub contract charges /
payments) and (ii) input tax credits), attributable to such portion of the work
would not qualify for deduction. Thus, such amounts relatable to all the unsold
units should be reversed on a monthly basis.
L & T Ltd – Issues…
► What would happen if the deductions and credits are carried forward
and are reversed at the time when the agreement to sell is entered into?
Where the deductions are proposed to be carried forward and reversed only at the
time of entering into the „agreements to sell‟, it could tantamount to a case of
claim and utilisation of ineligible deductions / credits, for the said period (from
the date of claim upto the date of reversal). This would attract consequential
interest and penalties.
L & T Ltd – Issues…
► Can the deductions and credits be claimed in full under the contention
that the total construction value is offered to tax (including the amount of
work done upto the date of the agreement to sell)?
Where the developer has offered the full value of the construction contract to tax,
viz., including the non-taxable portion, in our view, it shall be deemed that the
tax is incorrectly or wrongly paid by the developer on a value which his not
liable to tax. Accordingly, where such tax is collected and paid by the developer,
the same would be liable for forfeiture / penal action on the ground that excess
taxes have been collected from flat purchasers.
L & T Ltd – Issues…
► With respect to sub contract deductions – it is prescribed that appropriate
proof of payment of tax and disclosure in the return of the sub contractor
should be established - in respect of old contracts where the requisite
documentation was not obtained for all these years, what would be the
alternative remedy?
In the event such documentation are not available, in my view, the developer
would not be eligible to claim the deductions.
L & T Ltd – Issues…
► Where the returns were filed as ‘nil returns’ – however, without
prejudice, if the deductions / input credits were availed but not utilised –
on account of computation of ineligible amounts in terms of the SC
judgement – will penalty be payable under Section 72(2) on the premise
that excess input credits / deductions are availed in the returns?
In terms of the judgement of the Hon‟ble Supreme Court, the work executed after
the date of the „agreement to sell‟ would be liable to tax, irrespective of whether or
not the same was declared in the returns of the earlier period/s. Accordingly, the
dealer would also be entitled to claim the credit of input taxes indicated in the
returns filed for the earlier tax period/s. Therefore, in my view, the developer
would not be liable for penalty under Section 72(2) of the Karnataka VAT Act,
2003.
L & T Ltd – Issues…
► For each of the audit reports in Form VAT 240 already filed for the earlier
years, what would be the implications – should it be revised or should all
the adjustments be considered in the audit for the year 2013-14?
There being no bar on filing a revised audit report in Form VAT 240 in my view
it is suggested to file a revised report in Form VAT 240 as early as possible based
on the judgment of Honourable Supreme Court.
L & T Ltd – Issues…
► The Constitutional Bench of the Honourable Supreme Court has held that
composite contract of manufacture, supply and installation of lifts in
building amounts to works contract. Where, there are two contracts of
purchase of components of lift from a dealer and separate contract for
installation, the same would be 'sale' and 'labour or service' respectively.
Kone Elevators
► What is the basis to differentiate works contract and sale in the light of
the above judgment?
Whether the contract is for works contract or for sale of goods will have to be
decided with reference to the agreement between the parties. The terms of the
agreement would lead to a conclusion whether it is a 'Works Contract„ or not. In
other words, unless the contract is proved to be a 'Works Contract' by virtue of
the terms agreed as between the parties, invocation of Article 366 (29A)(b) of the
Constitution, cannot be made. Alternatively, if the terms of the contract disclose
or lead to a definite conclusion that it is not a 'Works Contract', but one of
outright sale, the same will have to be declared as a 'Sale' attracting the
provisions of the relevant sales tax enactments.
Kone Elevators - Issues
► Can the “dominant nature test" or "overwhelming component test" or "the degree
of labour and service test“ be applied to decide whether the contract is a works
contract or sale?
If the legal fiction introduced by Article 366(29-A)(b) is carried to its logical end, it
follows that even in a single and indivisible works contract there is a deemed sale of the
goods which are involved in the execution of a works contract. Such a deemed sale has all
the incidents of a sale of goods involved in the execution of a works contract where the
contract is divisible into one for sale of goods and the other for supply of labour and
services. Therefore, "the dominant nature test" or "overwhelming component test" or "the
degree of labour and service test" are really not applicable. If the contract is a composite
one which falls under the definition of works contracts as enacted under clause (29A)(b) of
Article 366 of the Constitution, the incidental part as regards labour and service pales into
total insignificance for the purpose of determining the nature of the contract.
Kone Elevators – Issues…
► What are the concepts arising out of this judgment?
- Works contract is an indivisible contract, but, by legal fiction, it is divided into
two parts, one for sale of goods, and the other for supply of labor and services;
- The concept of “dominant nature test” or, for that matter, the “degree of intention
test” or “over whelming component test” for treating a contract as a works
contract is not applicable;
- The term, works contract as used in Article 366(29A) takes within its ambit all
genre of works contracts and is cannot be narrowly construed to cover one species
of contract to provide for labor and service alone;
- Once the characteristics of the works contracts are met in a contract entered into
between the parties, any additional obligation incorporated in the contract would
not change the nature of the contract.
Kone Elevators – Issues…
Centum Industries (80 KLJ 65)
The Honourable High Court of Karnataka has held that the dealer
not putting forth the claim of input tax credit in the return filed for
the relevant period or in the revised return is not entitled to claim
input tax credit for the returns filed for another period after six
months.
The ratio of the judgement in the case of K. Bond Polymers Private
Limited was distinguished by stating that the case related to claim of
refund of input taxes and not for claim of input tax credit, per se.
Centum Industries (80 KLJ 65) - Issues
Whether input tax credit can be claimed by declaring in the return filed
for any other tax period within a period of six months?
With reference to the judgment the input tax credit not claimed in the return
filed for the relevant tax period should be claimed by filing the revised return for
the relevant tax period. Input tax credit declared in a return filed for any other
tax period will be liable for disallowance.
► Input tax credit not claimed during filing of returns determined during
the course of audit – whether the benefit of ITC can be given?
The certificate in Form VAT 240 provides for the option to declare the input tax
credit as determined on the audit. In my view the short claimed input tax credit
can be allowed and declared in Form VAT 240. However, in the light of the
above judgment, the department may deny such input tax credit not duly
declared in the return filed for relevant month.
Centum Industries (80 KLJ 65) - Issues
A dealer declaring purchases and input tax thereon in the details of
purchases uploaded – failed to declare in the return – whether
entitled to claim input tax credit?
Input tax credit declared in the details of purchases uploaded but not in the
return filed for the relevant month is liable for disallowance.
Time Tech India P Ltd., STA No. 40/2010
The Honourable High Court of Karnataka has set aside the penalty
levied under Section 53(12) for not carrying the delivery note during
the movement of goods on account of stock transfer on the grounds
that the dealer during the movement was carrying all the documents
to establish that the movement was on account of stock transfer.
Whether in lieu of delivery note the dealer can carry the documents
authenticating the purpose of movement?
In case of goods which are notified, the dealer should mandatorily carry the
delivery note in the Form e-Sugam even though certain other documents are
available.
TVS Motors Co., Ltd., 49/2011 to 26-28/2012
Supply of food and drink to the employees at nominal value qualifies
as incidental or ancillary business to the main business of the
assessee of manufacture and sale of two wheelers. As such
Honourable High Court of Karnataka has held that such a
transaction of supply of food at nominal value is a sale and is liable
to tax.
In such a scenario whether , the assessee can claim ITC of VAT paid
on purchase of food materials and can set-off such ITC against the
output tax payable on supply of food?
Yes.
TVS Motors 49/2011 to 26-28/2012…
Whether the dealer is entitled to upload the details of sale of food
articles and purchases in relation to such sales – (e-Upass)?
Yes.
Whether, the such a dealer can seek separate registration in relation
to running of canteen in the premises of factory?
Yes. He may also opt for payment of tax under composition scheme for
running canteen.
Manyata Promoters (P) Ltd (STA 2570 to 2576/2012)
The rejection of the application claiming refund of input tax credit of
VAT paid on purchases was set-aside by Honourable High Court of
Karnataka and held that the time limit of six months as prescribed
under Section 35(4) is not applicable for filing an application for
refund of input tax credit.
The reliance placed by the Revenue on the judgment of the
Honourable High Court in the case of Infinite Builders and
Developers (76 KLJ 390) was rejected since the facts were relating to
non claiming of input tax credit. Accordingly, it was held that facts
and circumstances of this case was distinct and different from
Infinite Builders case and consequently the said case would not be
applicable.
Whether the decision in the Centum’s case have any bearing on the
decision passed in this judgment?
The judgment in the Centum‟s case relates to claim of ITC with respect to
the monthly tax period. Whereas the judgment in the case of Manyata
relates to refund if ITC which has already been claimed.
Whether the decision is applicable only for claiming refund of input
tax credit by an SEZ developer or SEZ unit? Or the ratio of the
decision can also be applied for claiming input tax credit?
The ratio of the above decision is applicable only to SEZ Developer / Unit.
Thus the question of it applying to other categories of dealers does not arise.
Manyata Promoters (P) Ltd (STA 2570 to 2576/2012)
Whether the decision is applicable only for claiming refund of input
tax credit by an SEZ developer or SEZ unit? Or the ratio of the
decision in case of other dealers claiming refund input tax credit?
Yes. The decision can be relied on by any dealer claiming refund of input
tax.
Is there any provision under KVAT law to deny the benefit of input
tax credit or refund of input tax credit?
No. A close reading of the relevant provisions indicate that there is no
specific statutory provision under the Act to deny the benefit of input tax
credit / refund of input tax on the basis of time limit.
Manyata Promoters (P) Ltd (STA 2570 to 2576/2012)
Whether section 20 overrides only Section 35 or every statutory
provision of the Act?
Yes. Section 20 of the Act has overriding powers on every other statutory
provisions of the Act. This is because, Section 51 of the SEZ Act, 2005
provides for the SEZ Act to have overriding effect on any other law for the
time being in force.
Manyata Promoters (P) Ltd (STA 2570 to 2576/2012)
Honourable High Court of Karnataka has held that the dealer
engaged in the development and sale of software is entitled toclaim
the deduction of VAT paid on purchase of work-stations.
Does the ratio of the above decision apply to a manufacturer and can
he take credit of the tax paid on purchase of workstations?
The ratio of the above decision applies to a manufacturer for the limited
purpose of identifying whether workstations are furniture or not. Even
though such workstations are not “furniture”, they are liable to be classified
in terms of Entry 3 to the Fifth Schedule-”Electronics & Accessories”. No
input tax credit can be claimed since the workstations are not resold nor
used in manufacture.
Infosys Technologies (STRP 7/2001)