V AT is a multiple system of tax leviable at every stage of sales of goods made by a dealer, subject to credit of input tax paid at the time of previous purchase of the goods. ‘‘Input tax’’ and ‘‘output tax’’ are one and the same thing. The tax paid by the purchaser to the seller is input tax, while the tax realized by the seller from the purchaser and paid to the government is output tax. A controversy is prevalent as to whether ‘‘works contract and lease’’ are VAT commodities and the taxability on such item comes under the purview of VAT tax-net.
Following a number of litigations and the apex court decisions against levy of the tax on works contract and lease, the Constitution of India was amended in 1982 and ‘‘the transfer of property in goods involved in works contract’’ and ‘‘the transfer of right to use any good without transfer of ownership’’ have been brought under the purview of the definition of ‘‘sales of goods’’. The problem thus got a halt and tax on such transfer of property in goods and transfer of right of goods was well being levied under the Assam General Sales Tax Act, 1993. With the introduction of the Assam Value Added Tax Act, 2003, the basic principle of levy of tax, which has been discussed above, the levy of tax ‘‘works contract’’ and ‘‘lease’’ has become irrelevant in as much as the ‘‘works contract and lease’’ maintain their independent entity and separate bearing. The multiple system of sales clockwise or stage-wise in such deal become irrelevant. The VAT Act mainly dwelt on the basic principle of levy of tax on every goods at every stage of sale. It has not accommodated the principle of levy of tax on ‘‘the transfer of property in goods’’ involved in ‘‘works contract’’ and the transfer of right to use any goods involved in lease. There ought to be a provision dispensing with the main theme of VAT so as to accommodate this extra-ingredient in the tax-net of Assam. The scope for levy of tax under the VAT Act has been specified in the Schedule attached to the Act along with the category of taxable goods not specified in other Schedules of the Act with the broad term ‘‘works contract and lease’’. The basic principle of levy of tax has not been accommodated. ‘‘Works contract’’ and ‘‘lease’’ are not the goods and the concept of levy of tax on ‘‘works contract’’ and ‘‘lease’’ seem to be a deviation from the main spirit and intention of levy of tax on the sales of goods in the VAT ideology.
Assuming, but not admitting that the legislatures, while incorporating such measure of tax on ‘‘works contract’’ and ‘‘lease’’, intending to levy tax on the transfer of property in goods involved in works contract and on the transfer of right to use such goods involved in lease, the rates of tax specified in Schedule at 12.5 paise in the rupee, is not at par with the rate of commodity-wise tax, specified in the other Schedules of the Act. For instance, the rate of tax on the sales of declared goods is always 4 paise in the rupee and it cannot exceed the rate declared by the Government of India by enactment of the Central Sales Act, 1996 under the authority of the Constitution of India. Pipes of all varieties, pumps, tractors, ships vessels and many other allied articles, pertaining to ‘‘works contract’’ and ‘‘lease’’ do not have the rate of tax beyond 4 paise in the rupee. Naturally, there has been strong clash between the rate of the tax specified at 12.5 paise involved in ‘‘works contract’’ and ‘‘lease’’ and the rate of tax of goods specified in the schedules of the same VAT act. There cannot be double rate of tax on the same commodity for the purpose of ‘‘plain sale’’ or ‘sale in the course of works contract’’ as well as the alleged sales on ‘‘lease’’. Obviously, discrimination has been well maintained in tax-net scenario under the VAT Act of Assam.
The VAT law in Assam provided the measure of composition of tax on works contract to be exercised by the works contractors at their own option in dispensing with the requirements of making payment of tax on the sales element under the VAT Act. The rate of tax payable as composition of tax under such scheme has been specified at 4 paise in the rupee on the gross value of ‘‘works contract’’. Apparently, this is abusive of the principle of levy of tax, as enumerated in the Constitution read with the definition of VAT Act.
A transfer of property in goods involved in ‘‘works contract’’ is liable to be taxed. A tax is leviable on the taxable commodities and not on the exempted ones. Moreover, labour charges, transport charges and other allied charges involved on the works contract cannot be brought under the purview of taxability.
Given the above scenario, there is no doubt that a separate enactment of law is considered to be imperative for the sake of better administration vis-a-vis proper augmentation of revenue of the State without any scope of disputes or controversy.
Let there be some rethinking. THE SENTINEL
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