GOVERNMENT OF ANDHRA PRADESH COMMERCIAL TAXES DEPARTMENT
PROCEEDINGS OF THE AUTHORITY FOR CLARIFICATION AND ADVANCE RULING
(Under Section 67 of APVAT Act, 2005)
Present :
Sri T.Yugandhar Reddy, Addl.Commissioner(VAT)
Sri T.Vivek, Jt.Commissioner (VAT)
Sri K.Raghavaiah, Jt.Commissioner (Audit)
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CCT's Ref.No.PMT/P&L/A.R.Com/349/2005 DT. 4-10-2005
Ref:- CCT's Ref.No.PMT/P&L/A.R.Com/2005, Dt.13.4.2005
O R D E R:
M/s. Das Engineering Company, Nallakunta (TIN No.28690165912) have filed an application on 12.09.2005 and sought clarification and advance ruling on the following items under Section 67 of APVAT Act, 2005 read with Rule 66(2)(i) of APVAT Rules, 2005 alongwith the application fee of Rs.1000/-.
They sought clarification on the following:
(i) Whether the applicant is required to deduct tax from the sub contractors if the contract is for Government / other than Government.
(ii) Liability of tax if the involvement of material by the sub contractor is very nominal and if such materials are purchased from outside the State or India or from a dealer other than a VAT dealer in the State and the amount to be deducted from the sub contractor in the event of TDS being more than liability and the treatment of excess amount.
Sri Anirudh Gupta, Partner and T.Ramesh Babu, STP have appeared on behalf of the firm for hearing on 28-9-2005 and explained the case.
The issue has been examined with reference to the provisions of the APVAT Act and Rules and the ruling is given as under:
The applicant claims that he is in the business of executing works contract to Government and Local authorities and also to others. The applicant also states that he executes agreements for sub contracts in both the cases and in the circumstances seeks to know the liability in the light of amendments made in Ordinance 20 of 2005 and G.O.Ms.No.1614 dt.31.8.2005. The applicant has raised the following questions :
As per Section 4(7)(b) any dealer executing any works contract for the Government or Local authority shall be liable to pay tax by way of composition at 4% on the total value of the contract executed. Under sub section (3) of Section 22 of the Act tax @ 4% shall be deducted at source by the Contractee (Government Dept. / Local authority) and shall be remitted to Government in the prescribed manner. In the case of contract executed for other than Government as per the amended provisions in sub section (4) of Section 22, tax @ 4% shall be deducted at source. However such deduction shall not be made by a dealer or a firm awarding the contract where the value of the contract does not exceed to Rs.10 lakhs.
If a sub contractor uses any materials in the contract by purchasing them from outside the State / India or from any dealer other than a VAT dealer in the State, such dealer shall be liable to pay tax on the goods at the rates applicable to them under the Act. A new provision under Section 4(7)(e) has been inserted by Ordinance 20 of 2005, to this effect.
The applicant further seeks to know how the excess amount is dealt with if the TDS amount is more than his liability. According to Rule 17(3)(h) where any tax is deducted under sub section (4) of Section 22 and the contractor opted to pay tax by way of composition under clause © of sub section (7) of Section 4 of the Act, no refund of such tax deducted shall be allowed to the contractor. The reason is that tax liability and tax deduction are at the same rate. Sub section 4 of Section 22 refers to deduction of tax @ 4% in the case of VAT dealer executing works contract for Central Govt. or a Company or a statutory body or an undertaking or an institution other than Government or Local authority and as a result of amendment to clause (c) of sub section (7) of Section, the rate of tax by way of composition is 4% of total consideration. If the circumstances stated in the said sub section are present no refund of tax deducted shall be allowed.
The applicant raised the question of material involved in sub contract being nominal and such material purchased from outside A.P., whether there would be any liability on the part of sub contractor. The issue can be decided on the basis whether transaction is in the nature of job work or works contract. If it falls under job work, it is not taxable but the sub contractor cannot use 'C-Forms' to buy goods from outside A.P. with concessinal rate of 4%. If the transaction is a works contract, the sub contractor is exempted provided main contractor 'opted for' composition and to the extent of value of goods purchased from outside A.P., the sub contractor is liable to pay tax at the rates applicable to the goods. In case, the sub contractor pays tax on such goods, the main contractor can claim deduction for that turnover for paying tax by way of composition. Another issue arising out of this is whether TDS is to be made against sub contractor by main contractor. The answer is in the negative because sub contractor is exempt and TDS @ 4% is already made against main contractor.
Note: An appeal against this proceedings can be filed before the Sales Tax Appellate Tribunal, A.P., Hyderabad within 30 days of this ruling.