Sec.12

bfhs;Kjy; thp ahh; fl;l ntz;Lk; ?

gdpad; fl;o'; nt!;l;/ vz;bza; tpj;Jf;fs; (Oil Seeds)/ k";rs; nghd;w tptrha tpisbghUl;fs; Mfpatw;iw gjpt[ bgwhj tzpfh;fs; kw;Wk; tptrhapfsplk; rpyh; bfhs;Kjy; bra;J btsp khepyj;jpw;F neuo tpw;gid (Against Form C) bra;fpwhh;fs;.  ,th;fs; khjh khjk; Sec.12  bfhs;Kjy; thp ahh; fl;l ntz;Lkh?

            tpw;gid thp vd;gJ xU bghUis tpw;gth; kPJ tpjpf;fg;gLk; thp MFk;.  rpy neu';fspy; RC ,y;yhj tzpfh;fs; kw;Wk; tptrhapfsplk; bfhs;Kjy; bra;a[k; nghJ mth;fs; fl;l ntz;oa thpia/ TNVAT Act 2006/ Sec.12-d;  go bfhs;Kjy; bra;a[k; tzpfh;fs; fl;l ntz;Lk;.  ,e;j Section go purchase tax tpjpg;gjw;F Kjypy;/ th';Fk; bghUs; thpf;Fhpa bghUshf ,Uf;f ntz;Lk;. ,uz;lhtJ/ tpw;gid bra;nthh; kPJ thp tpjpg;g[ bra;a Koahj R{H;epiya[k; ,Uf;f ntz;Lk;. (mjhtJ Below 5Lakhs or 10 Lakhs Turnover Dealers).

            ,J kl;Lky;yhJ th';fpa bghUs; fPH;fz;ltw;Ws; VnjDk; xU tif epge;jidia g{hj;jp bra;J ,Uf;f ntz;Lk;.

1. ntW xU g[jpa bghUs; cw;gj;jp bra;tjw;fhf \yg; bghUshf

    gad;gLj;jg;gl;oUj;jy;;. ( Consumed as Raw materials)

2. th';fpa bghUs; tpw;fg;glhky; ,ytrkhf bfhLf;fg;l;oUe;jhnyh/

    jpUlg;gl;oUe;jhnyh/ my;yJ vjph;guhj tifapy; jP/ bts;sk; nghd;w  

    tpgj;Jf;fshy; mHpe;J nghFjy;. (Gifting, Theft, loss in fire, Flood, Transit etc.,)

3. th';fg;gl;l bghUs; btsp khepyj;jpy; cs;s j';fSila fpisf;nfh my;yJ

   tpw;gid KftUfSf;nfh mDg;gpapUj;jy.; ( Branch / Consingment Transfer)

4. th';fg;gl;l bghUs; ntW xU g[jpa bghUs; cw;gj;jp bra;tjw;fhf Machinery –Mf

    epWtg;gl;oUe;jhy;.

Mf/ th';fpa bghUis btspkhepyj;jpy; cs;s xUtUf;F neuo tpw;gidahf tpw;;fg;gl;lhy; Sec.12 go bfhs;Kjy; thp tuhJ.  ,e;j tpw;gidf;F C form bfhLj;jpUe;jhy; 2% CST thpa[k;/ C form bfhLf;fhtpl;lhy; 5% CST thpa[k; fl;l ntz;Lnk jtpu bfhs;Kjy; thp fl;l njitapy;iy.

              

Question and Answer

1. Is  AST payable by the Work Contractors who had opted to pay temporary tax under Section 7(c) of the TNGST Act 1959?

Ans:

            Earlier when 7-C was introduced in 1993, there was no parallel provision in the AST Act to levy AST on Works Contract Turnover on which compounding tax was paid.  But these AST was levied by the Department of South India Corporation, Coimbatore took up the issue to the High Court where the Division Bench held that there is no specific provision in AST Act to  levy AST on compounding turnover [124 STC 654 (MAD)].

            In order to get over the situation Explanation V was introduced by Act 23 of 2002 to Section 2(1) (aa) of the AST Act empowering the Assessing Officer to include the Total contract value in the Taxable Turnover for the purpose of levying AST.

            This explanation was challenged by Taher Alis Industries and Projects Ltd., in the Madurai Bench of Madras High Court and it is held that “Imposition of Sales Tax on the total contract value was not within the competence of State Legislature, as it was only the transfer of goods on which tax could be imposed”. Finally ‘Explanation V’ has been held as ‘inconstitutional’. [47 VST 155].

            Thus AST is not payable by the works contractors who are paying compounding tax U/s.7(c).  However, others who are paying tax U/s.3B has to pay AST.

 2.When TDS has to be collected and paid? Either at the time of payment receipts and at the time of raising the bill?

Ans:

Section 7-F, which imposes the condition to deduct tax at source (TDS), speaks only about payment of sums and upon every payment TDS has to be made.  Some contractors raise monthly bill and get monthly payment and they have no confusion.  In some cases, payments are made periodically and bills are raised at the end or in the middle.  Some times the payment will be more or less than the bill raise.  In such cases, TDS made at the time of payment had already been paid by the principle.  It is the duty of the contractor to get back the excess TDS amount if any.

  

3.Is Service Tax includible in the works contract turnover like CENVAT added to the sales value of goods?

Ans:    

            Central Excise Duty (CENVAT) is levied on the production of goods (cw;gj;jp thp).  But duty can be collected by the manufacturer at the time of delivery and to be paid in the next month.  Duty is a presale levy, and expenses incurred before the sale is made.  Any expenses incurred on the goods before sale is to be included in the sale value of the goods and sales tax to be levied on the sale value.  Therefore excise duty element is being added on the sales turnover and sale tax is levied on it. 

            But in the case of service tax on works contract, it is levied on the labour portion after the delivery of the goods.  The labour charges no way increases the cost of the goods and it is totally a different activity after the delivery of the goods is completed.  Hence labour charges, on which service tax is levied, need not be levied.  If it is levied it is purely unconstitutional.

“TAX ON WORKS CONTRACTS” 

A BIRDS EYE VIEW

           

            A sale is defined as “ Transfer of Property in goods for a valuable consideration”.  There are contracts for sale of goods, execution of work and for both.  Out right sales of goods is taxable.  Pure labour work is not taxable and what about the works contract with involvement of goods?  Here some goods are used or in the execution of that work and the cost of goods is collected from the party along with labour charges.  Is this a transfer of property amounting to sale?

            Earlier in Constitution of India there was provision to levy sales tax only on the sales of goods and not on the goods involved in works contract.  46^th Amendment on 02.02.1983 provided it and this was upheld by Supreme Court in 1989 in Builders Associations Vs Union of India reported in 73 STC 370 and again in 1993 in Ganon & Dukerly and Co. Vs State of Rajasthan reported in 88 STC 204. 

            On 26.06.86 section 3-B was inserted as a separate charging section in the TNGST Act 1959.  It was held valid by Madras High Court in 1995 in Tamil Nadu Mosaic manufacturer Association Vs State of TamilNadu reported in 97 STC 503.

            Assessments between 02.02.83 and 25.06.86 were cancelled by the department as there was no separate charging section.

TAXABILITY UNDER TNGST ACT

            The significant points for consideration whether a contract is liable to tax under section 3-B of the TNGST Act.

1.      Pure labour contract not involving any goods was exempted.

2.      Purchase price + Profit was liable to tax if it was purchased from other state against ‘C’ form or imported from other countries.

3.      Local Tax suffered single point goods and exempted goods were not liable.

4.      Goods used in works contract in the course export was exempted.

5.      If such contractor paid the tax, no tax for main contractor.

6.      If the value of goods is not separable from the total contract value, certain percentage as per section 3–B(2)(e) is to deducted for labour and balance taxable as the value of goods.

7.      There was compounding tax provision under section 7(c) and 2% on total contract value was payable by the civil contractor and 4% by others.

8.      TDS: Any person engaging a civil contractor must deduct TDS @ 2% on the Contract value paid.  But if the contractor was a registered dealer and pays tax regularly, a certificate from the Assessing Officer of the contractor can be produced to avoid TDS.

TAXABILITY UNDER VAT ACT

            The basic principle of works contract tax remains the same.  No major changes in the provisions of section 3-B of TNGST Act , but they were provided in Rule 8(5) of TNVAT Rules 2006.

           

            As in the case of sales, tax is payable at every stage after deducting the tax paid in the precious stage (ITC).

            Here also the compounding provision continues, but the compounding tax payer is prohibited from purchasing goods against ‘C’ form in other states.

            The TDS procedure is the same as in TNGST Act.

WORKS CONTRACT TAX CST ACT

           

Prior to 11.05.2002, there was no provision under CST Act to levy tax on interstate works contract.  On 11.05.2002, “Sale” under 2 (g) of the CST Act was redefined which empowers to levy CST.

            “C” Forms can be issued for works contract as the transfer of property is a deemed ‘Sale’ under works contract.

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