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 G. Lakshmi Prasad, Addl.Commissioner(General)

Sri G. Venkateswarlu, Addl. Commissioner(Legal)

Sri. V. Harshavardhan, JC (DMU & MA)

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CTD Order No. AR 43 Dated 23rd May, 2014.

A.R.Com/ 15/2014 Dated 23rd May, 2014.

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ORDER

M/s. My Home Constructions (P) Ltd., Hyderabad, (TIN:28800115727) has filed this application seeking clarification on the following issues under Section 67 of APVAT Act, 2005 ('Act' for short) read with Rule 66(2)(i) of APVAT Rules, 2005 ('Rules', for short), along with the application fees of Rs.1,000.

II. It sought clarification on the following issues:-

1) Whether the Net Receipt against the addition and deletions fall under Section 4(7)(a) of the Act read with rule 17(1)(a) of the Rules or under Section 4(7)(a) of the Act read with Rule 17(1)(a) of the Rules.

2) Can we deduct the amount payable towards deletions from the total consideration and pay the tax under Section 4(7)(d) of the Act on the balance sale consideration.

3) Whether we can opt for the composition for the Net receipt value of the addition and deletions under Section 4(7)(b) of Act read with rule 17(2)(b) of the Rules.

III.The applicant submitted the following documents:

Write up on the issue.

IV. Mr. C.Narsi Reddy, Sales Tax Practitioner and Authorised Representative of the applicant, appeared on 01-03-2014 and explained the case.

V. The issue has been examined with reference to the provisions of the Act and the Rules and also the G.Os issued there under till date.

This applicant is a work contractor. It is engaged in the contruction and selling of residential apartments and individual houses. It executes the following documents with the prospective buyers.

(a) Agreement of sale at the time of booking of flats.

(b) On completion of flats, the sale deed will be registered.

After execution of agreement of sale, and after starting of the works, certain deletions and additions are made to the interiors and other works of the flats shown in the agreements of sale. For deletions of the works, certain amounts are credited to the prospective buyers and for the additional works, certain amounts are debited to the prospective buyers.

CLARIFICATIONS SOUGHT

Issue-I :- Whether the net receipts against the additions and deletions fall under Section 4(7)(d) of the Act read with rule 7(4) of the Rules or under Section 4(7)(a) of the Act read with rule 17(1)(a) of the Rules.

Issue-II :- Can we deduct the amount payable towards deletions from the total consideration and pay the tax under Section 4(7)(d) of the Act on the balance sale consideration!

Issue-III :- Whether we can opt for the composition for the net receipt value of the addition and deletions under Section 4(7)(b) of the Act read with Rule 17(2)(b) of the Rules?

The questions, asked for by the applicant, are examined with reference to the Rule 17(4)(b) of APVAT Rules, 2005, which is extracted below:

"Before the commencement of execution of work the VAT dealer shall notify the prescribed authority on Form VAT 250, of his intention to avail composition for all works specified in clause (a) above, under taken by him"

As seen from the above Rule, the intention to avail composition is in relation to the work, but not the consideration received towards the execution of the work, as a part of the contract. The terms and conditions of the contract for a particular work may vary with mutual acceptance between the parties. Consequently, the consideration towards the execution of the work may also vary, depending upon the nature of changes in the terms and conditions of the original contract. In such circumstances, for a works contract to fall within the ambit of Section 4(7)(d) of the APVAT Act, the following conditions should be fulfilled:

i. The contract should be for construction and sale of residential apartments, houses, buildings or commercial complexes.

ii. The fulfilment of the contract shall end with the sale of the property and it should not continue beyond the transfer of property in question.

iii. The contractor shall opt for composition for the work in question.

After fulfilling the above conditions, there can be no other condition that is required to be fulfilled under the Act for the said works contract to fall within the ambit of Section 4(7)(d) of the APVAT Act. It should be noted that consideration is a consequence of the execution of the works contract and it need not be static. The amount of consideration may vary with the changes in the terms and conditions of the contract on mutual agreement. The taxable consideration should always be the amount received or receivable by the contractor. It cannot be an amount which is declared in a particular Form, prescribed under the Rules, irrespective of the actual consideration received or receivable.

Therefore, only the actual amount of consideration, received or receivable, as on the date of transfer of property after execution of the work, alone, should be taken as the taxable turnover, but not the amount, shown or declared in VAT Form 250.

Thus, it is clarified that in the circumstances, explained above, the net amount, received or receivable as consideration, which remains after changes in the specification of the original work, contracted for execution, shall be reckoned as taxable consideration under Section 4 (7)(d) of the APVAT Act. In other words, it is only the actual sale consideration, which is liable to tax under the said provision of the Act. Further, it is clarified that the amount that is declared as the amount of consideration, receivable towards the execution of a particular work, for which the contractor has opted for composition in Form VAT 250, shall not be taken as the basis for assessment under Section 4 (7)(d) of the APVAT Act, if the same got changed after certain modifications (additions and deletions) to the original contract.

The application is disposed off accordingly

NOTE:- An appeal against these orders lies before the Hon'ble Sales Tax Appellate Tribunal, A.P Hyderabad Bench, within 30 days from the date of receipt of this ruling.