GOVERNMENT OF ANDHRA PRADESH

COMMERCIAL TAXES DEPARTMENT

PROCEEDING OF THE

AUTHORITY FOR CLARIFICATION AND ADVANCE RULING

(Under Section 67 of APVAT Act, 2005)

Present : Sri T.Yugandhar Reddy, Additional Commissioner (Policy)

Dr. Sri K.Raghavaiah, Joint Commissioner (DMU & All Acts)

Sri P. Satyanarayana Reddy, Joint Commissioner(Legal)

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CCT's Ref.No.A.R.Com/178/2006 Dt: 12-3-2007

Ref: CCT'S Ref.No.PMT/P&L/A.R.COM/2005, Dt:13-4-2005.

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O R D E R:

M/s. K.K.Rao Engineering Works Private Limited, Hyderabad (TIN No.28910169235) have filed an application and sought clarification and Advance Ruling under Section 67 of the APVAT Act, 2005 read with Rule 66(2)(i) of APVAT Rules,2005 along with the application fee of Rs.1000/-. The application is examined and found in order. Hence admitted.

The applicant is seeking clarification on the following :

1. Rate of VAT to be charged for sale of Transformers to APGENCO, APTRANSCO, APCPDCL, APSPDCL, APEPDCL, APNPDCL and to others.

2. VAT rate applicable for works contracts executed for APGENCO, APTRANSCO etc. if they have not opted for payment by way of composition.

3. TDS rate for the works contracts.

The case was posted for hearing on 7.3.2007. Sri M.Rama Krishna, Finance Manager of the firm appeared and explained the case.

The issue has been examined with reference to the provisions of the APVAT Act and Rules and HSN codes notified by Government vide G.O.Ms.No.398 Rev.(CT.II) Dept, dt.31.3.2005 and G.O.Ms.No.490 Rev.(CT.II) Dept, dt.15.4.2005 as superceded in G.O.Ms.No.1596 Rev.(CT.II) Dept, dt.27.8.2005, G.O.Ms.No.1615 Rev.(CT.II) Dept dt.31.8.2005 and G.O.Ms.No.502 Rev (CT.II) Dept, dt.1.5.2006 and G.O.Ms.No.656 Rev. (CT.II) Dept. dt. 6.6.2006 and G.O.Ms.No.795 Rev (CT.II) Dept, dt.29.6.2006.

They have produced a copy of memo issued by APTRANSCO with regard to recovery of excess tax to the extent of 8.5% on account of reduction in tax rate by G.O.Ms.No.1625 dt.6.11.2006. The issue has been examined with reference to the provisions relating to works contracts and TDS under the Act and also G.O.Ms.No.1625 dt.6.11.2006. In the G.O. cited, an entry 116 was added to Schedule IV of the Act providing for concessional tax rate on 4% on sales made to State Government departments and certain State undertakings. With regard to the provisions relating to works contracts and TDS under the Act, an amendment has been made by Act, 5 of 2007 dt.22.1.2007 and amendment made to Rules vide G.O.Ms.No.88 dt.27.1.2007. Based on these provisions, the ruling is given as under :

1. Sales of Transformers made to APGENCO, APTRANSCO, APCPDCL, APSPDCL, APEPDCL, APNPDCL are taxable at the rate of 4% from 1.9.2006.

2. If transformers are used in the course of the execution of works contract and the applicant has not opted for composition, the tax rate on the value of transformers would be 4% in respect of the customers cited above. However, the terms of the contract need to be examined to establish whether the transaction in question is a works contract or is a transaction of direct sale. In either case the tax rate is 4% with the customers are of APGENCO, APTRANSCO etc. The tax rate on transformers being 4%, it is immaterial whether transformers are brought from outside the State or purchased within the State.

3. If the transaction is established as a works contract, the provisions of tax deduction at source are attracted and rates of TDS are prescribed in Rule 18 notified by G.O.Ms.No.88 dt.27.1.2007. The applicable TDS is 2.8% on the total value of the work. It is however for the concerned Authority to determine whether the transaction is a works contract or not.

Note: An appeal against this proceedings can be filed before the Sales Tax Appellate Tribunal, A.P., Hyderabad within 30 days of this ruling.

ADDL/JOINT COMMISSIONER