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138 GOODS & SERVICES TAX - MAGAZINE [Vol. 1 How imports would be taxed? Currently, import of goods suffer CVD (in lieu of excise duty) and SAD (in lieu of VAT). On import of taxable services, service tax is attracted. In GST regime, both CGST and SGST would be levied on import of goods and services. GST paid on goods and services would be eligible for input tax credit. How SEZ will be taxed? If the supply of goods or services is for consumption in processing zone then it would be zero rated. Supply of goods and services from SEZ to domestic area would be treated as domestic transaction and taxed. What about special schemes which are prevalent today? The exemptions available under Special Industrial Area Schemes would continue up to legitimate expiry time both for the Centre and the States. Later, after the introduction of GST, the tax exemptions, remissions, etc., related to industrial incentives would be converted, if at all needed, into cash refund schemes. Whether all the products would be under the GST regime? No. Items containing alcohol and petroleum products would be outside the GST regime. Inclusion/exclusion of ‘purchase tax’ is being discussed. How GST would be administered? CGST will be administered by the ‘Central Government’ and SGST will be administered by the respective State Governments. 10-GST GOODS & SERVICES TAX CASES ❑ JANUARY 20 - FEBRUARY 4, 2010 ◆ 48
2010] Skyline Constructions & Housing (P.) Ltd. v. AC&AR (Kar.) 173 A B C D E F G [2010] 1 GST 173 (KAR.) HIGH COURT OF KARNATAKA Skyline Constructions & Housing (P.) Ltd.* v. Authority for Clarification and Advance Rulings, Bangalore K.L. MANJUNATH AND ARAVIND KUMAR, JJ. ST APPEAL NO. 24 OF 2006 NOVEMBER 17, 2009 WORKS CONTRACT - Taxability of - Whether once a work is assigned by contractor to its sub-contractor, contractor ceases to execute work because property passes by accretion and there is no property in goods left with contractor which is capable of retransfer either as goods or in any other form - Held, yes - Whether, therefore, transfer of property is from sub-contractor to contracting party that is contractee, namely, recipient - Held, yes - Whether, in such a situation, payments made by contractor to sub-contractors cannot be brought within total turnover of contractor as such an interpretation would lead to double taxation - Held, yes [Section 4 of the Karnataka Value Added Tax Act, 2003] FACTS The assessee was a registered dealer under the Act. It was engaged in the execution of the works contract for construction of residential apartments. It was paying tax at 4 per cent in terms of Notification No. FD 54 CSL 2005(7), dated 23-3-2005. In course of the execution of the works contract, it claimed to employ sub-contractors who were also said to be registered under the KVAT and were paying taxes as per the provisions of the Act and the rules made thereunder. The assessee sought for an advance ruling under section 60 read with rules 163 to 165 of the KVAT Rules, 2005 as to whether the works entrusted to sub-contractors would also come within the total turnover of the assessee. The AAR held as follows : (a) In the absence of specific provisions for deduction on the turnover of the sub-contractors up to 31-3-2006, the activity of the works contract was exigible to tax at the rate applicable for goods involved in the transfer of property under the Act and section 4(c) with effect from 1-4-2006; (b) the payments made to the sub-contractors were not eligible for deduction up to 31-3-2006; and (c) the sub-contractors’ turnover was eligible for deduction with effect from 1-4-2006 by virtue of notification, dated 27-5-2006. *In favour of assessee. GOODS & SERVICES TAX CASES ❑ JANUARY 20 - FEBRUARY 4, 2010 ◆ 49
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