Taxability under works contract

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C.A. Anthony C D'souza (Querist)
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10 August 2011 An individual owning plot has given contract to an engineer (Individual) for constructing “9 blocks apartment“. Engineer has used his own material & labour. Payments were made to engineer in installments. After completion of the apartment the owner is selling blocks to various buyers.
1)Who is liable for Karnataka VAT, engineer or the owner? what is the tax liability?
2)Payments are already made to engineer during the year 2009-2010 without considering VAT. What is the procedure to be followed & interest & penalty payable as on date.
3)Engineer also constructs houses for personal use of customers. Whether construction of residential houses for the personal use of customer are exempt from Karnataka VAT?

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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11 August 2011 Mr. Anthony,
The engineer is the contractor who has executed the civil works of constructing 9 blocks building.He should have registered under VAT Act and declared the receipts of this work to the department as per rules.If he has failed to do so,he is only the defaulter.
Now the site owner has the 9 blocks apartment,which is an immovable property,in his hand.There is no tax on the sale of completed aprtments.

For delayed payments of tax 10% penalty and interest @1.5%/pm will accrue.It is not the responsibility of the apartments owner to clear the tax liability under VAT Act.
MJK

C.A. Anthony C D'souza

C.A. Anthony C D'souza (Querist)
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11 August 2011 Thank you Mr. MJK. Which scheme would be more beneficial to the engineer, VAT on total turnover or VAT on materials used for construction? What is the rate of VAT applicable?

Have a nice day.

Anthony

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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11 August 2011 Mr Anthony,
If you can maintain proper accounts normal taxing meethod i.e.on materials is always benificial.COT on total T.O. is 5%.VAT on meterials works out to around 2.5%.But for past transactions/receipts the option can not be changed now.Changes can be opted for future only.
MJK

C.A. Anthony C D'souza

C.A. Anthony C D'souza (Querist)
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13 August 2011 Engineer also constructs houses for personal use of customers. Whether construction of residential houses for the personal use of customer are exempt from Karnataka VAT?

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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13 August 2011 Mr Anthony,
If that engineer constructs a house or building,whether for customer's personal,commercial,rent or official use,all are one and the same in eyes of law. It will be taxable under KVAT law.If the engineer constructs a house for his own use then there will be no tax on it.
MJK

C.A. Anthony C D'souza

C.A. Anthony C D'souza (Querist)
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16 August 2011 Thank you Sir....

Have a nice day.

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