This presentation takes one through the details of recent Supreme Court Judgement in the case of Larsen & Toubro, which was a review of K Raheja Judgement. The judgement has a severe impact on the tax aspects of builders and real estate developers. It redefines the definition of works contract and levy of VAT on sale of flats and commercial premises
What is Agricultural Income ?
Section 2 (1A) of the Income tax Act,1961
Agricultural income means :
Revenue generated through rent or lease of a land in India that is used for agricultural purposes ;
Any income derived from commercial sale of produce gained from an agricultural land
Any income from farm building.
Key points to validly classify an income as “agricultural income”
Income should be from an existent piece of land in India ;
Income should be from a piece of land that is used for agricultural operations ;
Income should stem from produce achieved after cultivation of the land. Cultivation of land is a must ;
Income can be from a land that is not under the assessee’s ownership. i.e. ownership of Land is not essential.
ESOP is a step ahead to encourage, motivate and retain the existing employees in the company. Human resource is the most valuable asset for any company, which makes it important to have a idea about the incentive plans. This presentation focuses on one such area i.e. issue of ESOPs by companies in India.
2015 onwards, Annual Returns of ROC have become complicated, cumbersome and detailed. Annual Return itself requires lot many information. Board's Report is required to be supported by number of annexures. An attempt has been made to go through the technicalities.
Memorandum of association and Articles of association and partnership deed an...Aniruddha Dey
An study on memorandum of association and Articles of association. It contains the difference between memorandum of association and Articles of association, partnership deed and sales agency agreement and effects of registration of Memorandum of association and Articles of association while incorporating a business. All precisely.
Case Laws on Construction and Works contractsandesh mundra
A compilation of various Judgments of Service Tax and VAT on relevant issues in works contract and construction sector is made. Stands of High court is highlighted on complex issues arising in Constructions and taxation of works contract. A brief description of matter, appellant and petitioner's contemplation and order passed by authorities is also included to add more value.
What is Agricultural Income ?
Section 2 (1A) of the Income tax Act,1961
Agricultural income means :
Revenue generated through rent or lease of a land in India that is used for agricultural purposes ;
Any income derived from commercial sale of produce gained from an agricultural land
Any income from farm building.
Key points to validly classify an income as “agricultural income”
Income should be from an existent piece of land in India ;
Income should be from a piece of land that is used for agricultural operations ;
Income should stem from produce achieved after cultivation of the land. Cultivation of land is a must ;
Income can be from a land that is not under the assessee’s ownership. i.e. ownership of Land is not essential.
ESOP is a step ahead to encourage, motivate and retain the existing employees in the company. Human resource is the most valuable asset for any company, which makes it important to have a idea about the incentive plans. This presentation focuses on one such area i.e. issue of ESOPs by companies in India.
2015 onwards, Annual Returns of ROC have become complicated, cumbersome and detailed. Annual Return itself requires lot many information. Board's Report is required to be supported by number of annexures. An attempt has been made to go through the technicalities.
Memorandum of association and Articles of association and partnership deed an...Aniruddha Dey
An study on memorandum of association and Articles of association. It contains the difference between memorandum of association and Articles of association, partnership deed and sales agency agreement and effects of registration of Memorandum of association and Articles of association while incorporating a business. All precisely.
Case Laws on Construction and Works contractsandesh mundra
A compilation of various Judgments of Service Tax and VAT on relevant issues in works contract and construction sector is made. Stands of High court is highlighted on complex issues arising in Constructions and taxation of works contract. A brief description of matter, appellant and petitioner's contemplation and order passed by authorities is also included to add more value.
This presentations discusses the finer aspects of how VAT was being levied on Works contract. And the controversies related to the judgement of Gannon Dunkerly, options available for deductions under VAT for composite contracts
This presentation takes one through the impact of budget 2014 on the direct tax provisions. Efforts have been made to simplify the amendments in the best way
Service tax on Works Contract (Post Negative List)sandesh mundra
This article briefly explains the basics of service tax on works contract after the negative list regime. Also covering some of the old disputed issues in the service tax regime. It also touches upon the basic aspects of Cenvat Credit moreso in an environment, where both taxable and exempt services are being rendered.
This judgement takes one through the judgement of Kone Elevators in great detail. Various contentions, arguments and the final verdict of the court have been adequately covered in this judgement.
This presentation discusses the intricacies involved and the modifications in the taxation of works contract in various VAT Regimes. It highlights the critical issues to be asked when a project company enters into any state for its operations.
This ppt explains in very brief the facts about GST implementation in India. The taxes which shall be subsumed within GST and the present taxes which shall remain out of GST ambit.
Service tax on works contract (Pre-Negative List)sandesh mundra
This ppt gives a glimpse of service tax payment in india as applicable to works contractors before the negative list. This is very relevant to builders and developers. Service Tax posers and illustrations were also covered by the speaker during the presentation.
Are the rights and obligations arising from a license transferable under Arti...Michal
The judgement of the Supreme Court here described refers to the acquisition
of rights arising from a license by an entity which has acquitted a state enterprise
as a result of direct privatization, pursuant to Article 40 of the Act of 20 August
1996 on Privatization and Commercialization1 (hereafter PCA). In the event the
aforementioned acquisition occurs, the purchaser shall become the subject of the
rights and obligations under the license; inter alia the purchaser is eligible to request
performing the amendment of the decision which granted the license under Article
155 of the Code of Administrative Procedure.
Which authority is competent to decide when a power company is abusing monopo...Michal
By the decision of July 10, 2006 (No. RKT-42/2006), the President of the Polish
Office for Competition and Consumer Protection (hereafter, UOKiK) found that the
practice of the Częstochowa Power Company, a branch of ENION SA based in Kraków
(hereinafter ENION SA), was restricting competition by abusing its dominant market
position in the transmission and distribution of electricity by making the conclusion
of contracts subject to acceptance by the other parties of supplementary obligations
which, by their nature or according to commercial usage, have no connection with
the subject of such contracts. The UOKiK President imposed a fine on ENION SA
of 100 000 zł.
Order dated 18.04.2016 in Writ Civil 90 of 2016 by SCOm Prakash Poddar
Writ Petition Criminal 136 of 2016 would not have come into picture, had Justice Ranjan Gogoi would have taken addition ground filed through Interlocutory application no.03 into his consideration. This writ was filed against the Rtd. Justice S.B. Sinha's aide Mr. Praveen Kumar, Indian Defense Account Service & CMD of IDPL, New Delhi. Hence my mother's life could have been saved.
The following presentation tends to explain the concept of Summary proceedings under the Civil Procedure Code in India.It elaborates on the suits to which this order applies and the procedure to be followed therein.
This ppt is a comprehensive presentation on various aspects for the entities working in the construction domain. Starting from Tendering to Budgeting and going on to indirect tax aspects like VAT and service Tax.
Section 65(105)(zzzh) provides for a levy of service tax on services in relation to ‘construction of complex’ and an explanation was added by Finance Act, 2010.
Real estate transactions Under taxing lawGST Law India
The following presentation enumerates the taxing structure for real estate transactions and gst rates along with a comparison of the previous tax structure with the present structure under GST. it also discusses service tax on work contracts, service tax on renting, credit linked subsidy scheme, valuation of taxable supply, input tax credit, exemptions for builders, housing society.
Embargo on levy of service tax on flats under composite contracts - Dr Sanjiv...D Murali ☆
Embargo on levy of service tax on flats under composite contracts - Dr Sanjiv Agarwal - Article published in Business Advisor, dated June 25, 2016 - http://www.magzter.com/IN/Shrinikethan/Business-Advisor/Business/
Tweeted on www.twitter.com/BusinessAdvDM
After introduction of RERA, West Bengal has come up with its own legislation West Bengal Housing Industry Regulatory Act, 2017. There are various critical issues in this emerging law which can be addressed with the help of decisions and orders of numerous states.
Complications of GST for Real-Estate and Developerssandesh mundra
This presentation contains the categories of units available with the developer as on the appointed day and the controversy attached with each category of unit. The presentation precisely covers all the controversies that could come up for the given category of unit.
EXOTICA” is one of Delhi / NCR's leading Infrastructure Company. It has launched many projects in the past which have been a huge success. Exotica always believes in providing excellent quality and total commitment.
With the introduction of the concept of GST Audit, it is important to know and taken int consideration various facts that is needed before we conduct GST Audit. In this presentation, we have covered the concept of filing of GSTR 9C, its applicability and various other topics that one should take care of. The presentation also covers an example of GSTR 9C based upon a hypothetical case. The PPT is a one shot compilation of various topics associated with GSTR 9C - GST Audit.
With the introduction of the concept of GST Audit, it is important to know and taken int consideration various facts that is needed before we conduct GST Audit. In this presentation, we have covered the concept of filing of GSTR 9C, its applicability and various other topics that one should take care of. The presentation also covers an example of GSTR 9C based upon a hypothetical case. The PPT is a one shot compilation of various topics associated with GSTR 9C - GST Audit.
With the introduction of the concept of GST Audit, it is important to know and taken int consideration various facts that is needed before we conduct GST Audit. In this presentation, we have covered the concept of filing of GSTR 9C, its applicability and various other topics that one should take care of. The presentation also covers an example of GSTR 9C based upon a hypothetical case. The PPT is a one shot compilation of various topics associated with GSTR 9C - GST Audit.
With the introduction of the concept of GST Audit, it is important to know and taken int consideration various facts that is needed before we conduct GST Audit. In this presentation, we have covered the concept of filing of GSTR 9C, its applicability and various other topics that one should take care of. The presentation also covers an example of GSTR 9C based upon a hypothetical case. The PPT is a one shot compilation of various topics associated with GSTR 9C - GST Audit.
In this presentation, the concept of Affordable Housing is discussed from various angles such as income tax and GST. The PPT also analyses various components of Affordable housing scheme. It also takes into consideration various practical scenarios which are discussed in the form of case studies. The affordability as per public lending institution has also been covered. The presentation also covers various policies and programmes undertaken by the government for promotion of the same.Lastly, it also covers the impact of anti profiteering under the scheme.
This presentation covers a multidimensional view on impact and effect of GST on industry, economy, assessee, department and Government. An attempt is made to give justice to the multidimensional view of how things work in the industry and the future of GST impact on these stakeholders.
An attempt to summarize the crucial aspects of maintaining records under GST is made. Apart from this, the presentation includes all types of audits proposed under GST regime. The system of return filling that the Group of Ministers are finalising together with GSTN officials and stakeholders is also included in the presentation. It also includes issues that may arise during filling of annual return and reconciliation statement.
An attempt to compile relevance of contractual clauses, technique of claiming back lost exemptions through doctrine of promissory estoppel, effect of repeals and omission and related judgments, is made. An overview of legal aspects for ongoing contracts is included.
Issues faced by Realtors and works contractorssandesh mundra
We have listed down several issues faced by Real estate and construction sector. A long list of issues are included separately for builders and works contractor for transition and post GST period.
Presentation contains cases and judgements delivered by courts pre-GST regime. A brief summary of all caselaws is made and an attempt is made to provide a bird's eye view of litigations arising in GST.
Presentation is prepared with the object of simplifying the interpretation issues and providing guidelines to read the rate schedules. Methods and mechanism of claiming tax free exports is also explained.
Goods and Service Tax in India is one of the biggest tax reform in Indirect Tax Regime. It is a destination bases tax levied on supply of Goods and Services. It includes impact of GST on several sectors. It also includes development of GST by way of notifications, circulars, press releases and other other compliances under GST.
Real Estate Regulation Act, 2016 which is in force since 1st Mat 2016 will finally get all its teeth on 1st May, 2017 with the setting up of the statewise Real Estate Regulatory Authorities
Independent Study - College of Wooster Research (2023-2024) FDI, Culture, Glo...AntoniaOwensDetwiler
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
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2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the what's app number of my personal pi vendor to trade with.
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Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby...Donc Test
Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby, Hodge, Verified Chapters 1 - 13, Complete Newest Version Solution Manual For Financial Accounting, 8th Canadian Edition by Libby, Hodge, Verified Chapters 1 - 13, Complete Newest Version Solution Manual For Financial Accounting 8th Canadian Edition Pdf Chapters Download Stuvia Solution Manual For Financial Accounting 8th Canadian Edition Ebook Download Stuvia Solution Manual For Financial Accounting 8th Canadian Edition Pdf Solution Manual For Financial Accounting 8th Canadian Edition Pdf Download Stuvia Financial Accounting 8th Canadian Edition Pdf Chapters Download Stuvia Financial Accounting 8th Canadian Edition Ebook Download Stuvia Financial Accounting 8th Canadian Edition Pdf Financial Accounting 8th Canadian Edition Pdf Download Stuvia
Seminar: Gender Board Diversity through Ownership NetworksGRAPE
Seminar on gender diversity spillovers through ownership networks at FAME|GRAPE. Presenting novel research. Studies in economics and management using econometrics methods.
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
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BONKMILLON Unleashes Its Bonkers Potential on Solana.pdfcoingabbar
Introducing BONKMILLON - The Most Bonkers Meme Coin Yet
Let's be real for a second – the world of meme coins can feel like a bit of a circus at times. Every other day, there's a new token promising to take you "to the moon" or offering some groundbreaking utility that'll change the game forever. But how many of them actually deliver on that hype?
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
2. Consult Construction is a consulting firm with all governance,
compliance and IT related services related to the construction sector
under one roof.
Focus Areas :Corporate Governance
Management Audit
Project Budgeting and Monitoring
Indirect Tax Compliances
Corporate Training
Information Technology and Allied Services
ISO Implementation
www.consultconstruction.com
3. Indirect Tax Services
Advice on the applicability and levy of Service Tax, CST and State VAT on
Contracts entered into or proposed to be entered into by the company.
Assistance in the structuring of transactions and agreements in relation
to inter-state and intra-state sales to optimise the tax incidence
Conduct tax based health checks to determine the service tax & Multi
State - VAT implications on the operations,
Giving Multi State VAT opinions
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4. Subscribe to our E-Bulletin
Call at 9426024975
email - info@consultconstruction.com
• VAT and Service Tax updates for the construction / Project sector
companies.
• Legislative changes and major case laws under the State VAT Laws and
under Service Tax law affecting the construction /Project Sector.
• In addition our brief analysis and comments on the various
developments.
www.consultconstruction.com
5. History…
• Levy of Sales Tax / VAT on Works contract
• Power of states confined to taxes on sale or
purchase of goods
• GDC – I – Five Judge Bench- Theory of
Accretion
• Para 51 of GDC – I – True Interpretation of
the expression of sale of goods
• Constitution’s 46th Amendment
www.consultconstruction.com
6. History…
• Five Judge Bench in BAI- Upheld
Constitution’s 46th Amendment
• Five Judge Bench in GDC-II laid down the
valuation norms
• Three Judge Bench in BSNL – Vivesection
• Then came Raheja
www.consultconstruction.com
7.
8. Back Ground
• Karnataka, in the early 2000s, the rate of sales
tax used to be rather low at around 4%, while
the stamp duty rate used to be at around 15%.
• Some of the brightest tax brains (in Bangalore)
came out with a plan
• Split the consideration into two agreements,
viz. one, for the sale of the undivided portion of
the land and the second, for the construction of
the apartment
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9. • When the VAT law came into effect from 14-2005, the VAT rate was fixed at 12.5% and
the stamp duty has come down to 5%.
• What was good planning in an era where the
stamp duty rate was high became a disaster,
with the sales/VAT rates climbing up
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10. When is a job established as a Works Contract –
FACTS IN THE CASE OF SUPREME COURT JUDGEMENT
OF K. RAHEJA DEVELOPMENT CORPORATION
• Appellants were carrying on business as real estate
developer.
• They entered into Development agreement with owners
of land.
• The agreement was for carrying out construction on
behalf of somebody else.
11. Facts Contd….
• The land owner transferred only the ownership of land
to the society and the appellant transferred structure by
a separate agreement for construction.
• The appellants were carrying out construction as
developers for the prospective purchaser.
• Agreement entered into before the completion of the
unit, was considered as Works Contract.
• Agreement entered into after the flat or unit already
constructed would not be within the ambit of works
contract.
12. • Works Contract - Section 2(1)(v-i) of Karnataka Sales Tax
Act defines a "works contract" as: "works contract"
includes any agreement for carrying out for cash, deferred
payment or other valuable consideration, the building,
construction, manufacture, processing, fabrication,
erection, installation, fitting out, improvement,
modification, repair or commissioning of any moveable or
immovable property.
13. • Kar HC gave a great regard to the wide definition
of works contract under Karnataka VAT
• Sales Tax -Works Contract - So long as there is no
termination the construction is for and on behalf
of purchaser
• If the agreement is entered into after the flat or
unit is already constructed, then there would be no
works contract-
14. • On the basis of K Raheja, can we say that all
builders are liable to VAT?
15. L&T Dev Project
• L & T - contract to develop the property of
Dinesh Ranka- 75:25.
• SCN - Tripartite Agreement is a works
contract.
• No allegation of consideration involved in
the first contract which is the Development
Agreement.
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16. Review……
• However Supreme Court on Aug 19, 2008 had referred
the judgment for reconsideration to a larger bench
considering the Writ Petition filed by L&T on the count
that the judgement has adversely affected the entire
construction industry.
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17. Raheja needs reconsideration
• There would be no difference between
works contract and a contract for sale of
chattel as a chattel.
• Could it be said that petitioner Company
was the contractor for prospective flat
purchaser.
• Observations of Dept, Dev Agr is not works
contract but the Tripartite Agr is works
contract which appears to be fallacious.
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18. Raheja needs reconsideration
• There were 26 appeals for reconsideration
out of which
• 14 appeals were from Karnataka and
• 12 were from Maharashtra.
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19. • While interpreting the Judgement, Lets
appreciate the fact that the definition of
‘works contracts' under the VAT laws of
most States are very similar to Karnataka
and thus this decision will apply to almost,
the whole of the country.
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20. Def’n in Gujarat
• Contract to do any works
• Valuation
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23. Key contentions of the Appellants
• GDC – I still a good law
• Wider definition of works contract not acceptable
• Applicability of Article 366(29-A) read with Entry
54 of List II still cannot apply to an agreement for
sale of immovable property resulting in a
conveyance.
• well-known tests to determine whether a particular
contract is “works contract” or “contract of sale”
have not been adverted to.
• Dominant intention of the agreement was to sell a
flat and not enter into a works contract.
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24. Key contentions of the Appellants
• work undertaken is for joint development of
project as a whole, ie work is undertaken by
developer for himself and the owner; and
not for purchaser;
• the flat is to be sold as a flat and not an
aggregate of its component parts;
• if a suit is filed by flat purchaser, it would be
for conveyance of title and not for
construction of a building.
www.consultconstruction.com
25. Key contentions of the Appellants
• Maharashtra - Section 2(24) of MVAT Act and
Rules 58 and 58(1A) - redefine the taxable
event by moving away from theory of accretion
to transfer of immovable property by way of
conveyance and that renders these provisions
unconstitutional;
• State levies stamp duty on agreement of sale
under Entry 25 (as immovable property) and
not under Entry 63 (as works contract) and
hence does not consider agreement for sale to
be works contract.
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26. Key contentions of the Appellants
• Main intention remains to buy the flat
• Buyer has no role in conceptualising the
project / design / supervision / material
quality
• Accretion happens in the hands of developer
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28. Key contentions of the Revenue
• View taken in Raheja Development case is
correct and needs no reconsideration.
• After insertion of Article 366 (29-A)(b) in
Constitution, transfer of movable property
in works contract is deemed to be sale even
though it is not sale as per Sale of Goods Act.
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29. Key contentions of the Revenue
• Nothing in Article 366(29-A)(b) limits the
term “works contract”, and ownership of
goods need not pass only by way of
accretion or accession to owner of the
immovable property.
www.consultconstruction.com
30. Key contentions of the Revenue
• No question of ascertaining dominant
intention of contract since sale of goods
element is deemed sale under Article
366(29-A)(b) and can be taxed separately.
• A composite contract comprising both
works contract and transfer of immovable
property does not denude it of its character
as works contract.
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31. Key contentions of the Revenue
• Different aspects of same transaction can
involve more than one taxable event.
Transfer of immovable property cannot be
taxed as sale of goods but there is no
constitutional bar to tax only sale of goods
element.
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32. Key contentions of the Revenue
• Explanation b(ii) in section 2(24) of MVAT Act
offers diverse options for valuation which are
methods approved by the SC
– in Gannon Dunkerley& Co and others v State of
Rajasthan and Others (1993-1-SCC-364) (“Gannon
Dunkerley-II”).
• Further, Rule 58A and Rule 58(1A) of the MVAT
Rules are constitutionally valid, as these
provisions are consistent with principles laid
down in Gannon Dunkerley-II.
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33. Key contentions of the Revenue
• As long as there is obligation to construct
under agreement between Developer and
flat purchaser (in case of Maharashtra, being
agreement under MOFA) deemed sale of
goods can be taxed even after incorporation
of goods in works
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34. Ruling of the Supreme Court
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35. Ruling of the Supreme Court
• “Tax on sale or purchase of goods” in Entry
54 in List II of Seventh Schedule when read
with definition clause 29-A of Article 366
includes tax on transfer of property in
goods, whether as goods or in some other
form involved in execution of works
contract.
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36. Ruling of the Supreme Court
Three conditions :
- there must be a works contract;
- goods should have been involved in
execution of works contract; and,
- property in those goods must be transferred
to third party either as goods or in some
other form.
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37. Ruling of the Supreme Court
• For purpose of Article 366 (29-A)(b), in
building contracts or any construction
contracts, if consideration is received, all the
above conditions are satisfied
• As in performance of a contract for
construction of building, goods (chattels)
like cement, concrete, steel, bricks etc are
intended to be incorporated in the structure
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38. Ruling of the Supreme Court
• A contract comprising both works contract
and transfer of immovable property, does
not denude it of its character as works
contract.
• The term “works contract” in Article 366
(29-A)(b) is not restricted to contract to
provide for labour and services alone.
• Building contracts are species of works
contract.
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39. Ruling of the Supreme Court
• The dominant nature test has no application
• Traditional decisions on substance of
contracts have lost their significance.
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40. Ruling of the Supreme Court
• Transfer of property in goods under Article
366 29-A(b) is deemed to be sale of goods
involved in execution of works contract by
person making transfer and purchase of
those goods by person to whom such
transfer is made.
• Purchase Tax
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41. Ruling of the Supreme Court
• Value of goods which can constitute the
measure for levy of tax has to be value of
goods at time of incorporation of goods in
works, even though property passes as
between developer and flat purchaser after
incorporation of goods.
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42. Ruling of the Supreme Court
• It is thus, not correct to say that work is
undertaken by developer for himself and the
owner and construction is not carried for
and on behalf of purchaser.
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43. Ruling of the Supreme Court
Constitutional validity of MVAT provisions, the SC held
that:
• - Amendment in explanation b(ii) to Section 2(24)
was brought because of judgment of SC in Raheja
Development and as the judgment lays down correct
legal position, there is no merit in challenge to
constitutional validity of the provisions.
• - However, wrt rule 58(1A), the SC held that mode of
valuation of goods provided in Rule 58(1A) has to be
read to include value of goods only at the time of
incorporation even though property in goods passes
later.
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45. Consequences
• The Apex Court has not overruled its
decision in the case of State of AP and Ors v.
Larsen & Toubro Ltd and Ors
• Impact on Pure developers
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46. Consequences
• As a matter of huge relief, the Apex Court
rejected the contention of the State of
Karnataka that sale of immovable
properties, whether finished or semifinished, are within the purview of VAT.
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47. Consequences- Para 115
• It may, however, be clarified that activity of
construction undertaken by the developer
would be works contract only from the
stage the developer enters into a contract
with the flat purchaser.
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48. • Let us assume that the total value of a flat is Rs 100
lakhs, with Rs 40 lakhs being treated as the value
of the land.
• On the date of the agreement 70% of the work has
already been completed in the flat.
• In terms of the L&T decision, only Rs 18 lakhs
representing 30% of Rs 60 lakhs can be treated as
a works contract.
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50. Consequences
• The L&T decision would have retrospective
effect,
• Will the State Governments be flooded with
refund applications from the flat purchasers
/ builders
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51. Consequences
• Possible Loss of revenue
• unless the Constitution is amended, there is
no way the States can get over this historic
decision.
• Reversal of Input Credit
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54. Consequences on service tax?
• Decisions of the High Courts in the Magus
Construction Pvt Ltd Vs Union of India (2008-TIOL-321-HC-GUW-ST) and
Assotech Realty Pvt Ltd Vs State of UP (2007-TIOL-297-HC-ALL-CT), which had
held that, no service is involved when the
Developer enters into an agreement of sale
shall no more be valid
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55. Consequences on service tax?
• Most transactions involving construction and sale of flats
would also get covered under Section 66E(b) of the
Finance Act, 1994, which reads as under:• construction of a complex, building, civil structure or a
part thereof, including a complex or building intended for
sale to a buyer, wholly or partly, except where the entire
consideration is received after issuance of completion
certificate by the competent authority.
• Can entry also cover transactions which are not works
contracts ?
• Can this include the value, of the period, prior to the date
of the agreement ?
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56. Consequences on Service Tax
• Instances where, the construction would be
complete but the CC would not have been
received.
• In these cases, it is perfectly legal to take the
view that, no VAT is applicable, as the
construction is complete. But, the levy of
service tax, in terms of Entry No. (b)of
Section 66E could still survive
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57. Consequences on service tax?
• In effect we could have a scenario wherein, a
transaction of construction and sale of a flat
could get treated quite differently, under the
VAT law and the Service tax law.
• Can we challenge the constitutional validity
of levy of service tax ?
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58. Consequences on Service Tax
• Constitutional validity of Explanations inserted
to the definition of 'commercial or industrial
construction' services and 'construction of
complex' services upheld by the High Courts of
Bombay, Punjab & Haryana and Madras.
• Given further the fact that this entry is under
the 'Declared List', the chances of a challenge to
its legality on constitutional grounds look very
bleak.
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59. Consequences on service tax?
• Can pure developers as per law laid down
by the Apex Court in the State of AP v. L & T
case challenge the new law that has taken
effect from 1-7-2012 as well as the old law
with effect from 1-7-2010, in respect of
‘construction services'.
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60. Consequences on Service Tax
• Do the Developer/Builder would have the
choice to opt for either of the entries under
Section 66E(b) or Section 66E(h) ?
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61. Consequences on Service Tax
• Section 66E(b) and Section 66E(h) would
indicate that, while services covered under
the earlier entry could cover the services
rendered under the latter entry, the
converse is not true.
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62. Consequences on Service Tax
• In effect, post L&T decision, the Developer/Builder
would seem to have two choices, viz.
• ++ to classify his service as a 'works contract' in
terms of Section 66E(h) and pay service tax in terms
of the L&T decision, on the balance value of
construction completed on and after the date of the
agreement.
• ++ to classify his service as 'construction service' in
terms of Section 66E(b) and opt for the abatement
scheme under Notification No. 26/2012-ST.
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63. Consequences on Service Tax
• Can you shift from 66E(h) to 66E(b) and opt
for the abatement scheme under
Notification No. 26/2012-ST.
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64. Consequences on Service Tax
• The Hon'ble Apex Court makes a strong
statement that the label of payment is not
decisive but the factum of the payment is.
• contentious items like non-refundable
deposits, amounts collected towards
providing water/electricity connections,
etc., may be considered for valuation of the
taxable services.
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66. Joint Development Agreement
• how does the L&T decision affect the levy of
service tax in respect of Joint Development
Agreements?
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67. Joint development Agreements
• This decision in Para 111 makes an
observation that "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 whereunder the developer has
undertaken to construct for the flat purchaser
for monetary consideration”.
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68. Joint Development Agreement
• There is a view that, in terms of Para 111,
reproduced above, even Joint Development
Agreements could get treated as works contracts
under the VAT law.
• Karnataka High Court is yet to pronounce its verdict
on the leviability of VAT on joint development
agreements.
• Service tax law on works contract would necessarily
have to follow the VAT law, not-withstanding some
CESTAT decisions, the Board Circular No.
151/2/2012-ST dated February 10, 2012 and the
Education Guide.
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69. Before concluding…
• ramifications arising out of the L&T decision on the Realty
Sector would be far and wide
• It would perhaps take some time for the Realty Sector to
fully digest the impact arising out of the L&T decision
• This decision could have no implications in so far as the
levy of stamp duty by the States is concerned
• It would be interesting to see how the States would react to
this historic decision in general and Para 115 in particular.
• The L&T decision may also impact works like BOT,
maintenance contracts, erection contracts, etc.
• Can we challenge the levy of Stamp Duty now
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70. Message from BAI Judgement
• The Constitutional-Amendment in Article 366(29A) read with the
relevant taxation-entries has enabled the state to exert its taxing power
in an important area of social and economic life of the community. In
exerting this power particularly in relation to transfer of property in
goods involved in the execution of 'works-contracts' in building
activity, in so far as it affects the housing-projects of the
underprivileged and weaker sections of society, the state might
perhaps, be pushing its taxation-power to the peripheries of the social
limits of that power and, perhaps, even of the constitutional limits of
that power in dealing with unequals. In such class of cases 'BuildingActivity' really relates to a basic subsistential necessity. It would be
wise and appropriate for the state to consider whether the requisite
and appropriate classifications should not be made of such buildingactivity attendant with such social purposes for appropriate separate
treatment. These of course are matters for legislative concern and
wisdom.
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Editor's Notes
and this would lead to the sustainable view that, if the Developer is not purchasing any goods and not transferring any property in goods to the prospective buyer, which is actually undertaken by the contractor appointed by the Developer, no VAT is still leviable on the Developer, under the VAT law.This argument is based on the view that, by not transferring goods, in the same or in other form, to the prospective buyer, the Developer, who has contracted out the construction activity, cannot be treated as a ‘dealer' or ‘works contractor' under the VAT law.
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.
In my view, with several High Courts upholding the constitutional validity of a similar entry which came into being from 1-7-2010, due to the insertion of the Explanation to the definition of the then prevailing ‘Construction of Complex' services and ‘Commercial or Industrial Construction' services, it seems unlikely that the constitutional validity of Section 66E(b) can be called into question.
But, in the aftermath of the L&T decision, it would seem that, there would be a lot of pressure (from the Department, of course) for the Developer/Builder to pay service tax under 'construction services' by opting for the Abatement Scheme under Notification No. 26/2012-ST, in terms of which, service tax is payable on 25% of the total value inclusive of the value of the land,
As such, there is no statutory bar for the Developer/Builder who has been paying tax under 'works contract' services to shift to paying tax under 'construction services'.
In my humble view, given the fact that, monetary consideration is a pre-requisite for levy of VAT, no sales tax/VAT can be levied in respect of joint development agreements entered into between the Developer and the owner of the land, as these are largely ‘barter' transactions involving the Developers and the Land owners. Though non-monetary consideration might be good enough to attract service tax levy, insofar as levy of service tax on works contracts is concerned, the service tax law will have to follow the VAT law and consequently, no service tax can be levied in respect of transactions between the Developers and Landowners.