Court :
Karnataka High Court
Brief :
The Hon'ble Karnataka High Court in the case M/s. Smart Value Homes (Peenya Projects) Private Limited vs. Joint Commissioner, Commercial Taxes (Appeals) and Others [S.T.R.P No. 47 of 2022 dated August 23, 2023] allowed the revision petition and held that the Prime Location Charges ("PLC")/ Floor Rise Charges ("FRC") would not fall within the definition of works contract under the Karnataka Value Added Tax Act, 2003 ("the KVAT Act") and such charges incurred by the buyer would fall within the purview of Service Tax.
Citation :
S.T.R.P No. 47 of 2022 dated August 23, 2023
The Hon'ble Karnataka High Court in the case M/s. Smart Value Homes (Peenya Projects) Private Limited vs. Joint Commissioner, Commercial Taxes (Appeals) and Others [S.T.R.P No. 47 of 2022 dated August 23, 2023] allowed the revision petition and held that the Prime Location Charges ("PLC")/ Floor Rise Charges ("FRC") would not fall within the definition of works contract under the Karnataka Value Added Tax Act, 2003 ("the KVAT Act") and such charges incurred by the buyer would fall within the purview of Service Tax.
M/s. Smart Values Homes (Peenya Projects) Private Limited ("the Petitioner") is engaged in the business of Development and Construction of Residential Apartments. The Petitioner, while undertaking a project, collected PLC/FRCfor flats located in prime locations. The Petitioner has discharged the service tax liability which is payable on PLC/FRC. However, the Petitioner has claimed exemption from payment of tax under the KVAT Act.
The Assistant Commissioner of Commercial Tax ("the Respondent") vide order dated February 17, 2018 ("the Order in Original")rejected the claim of exemption from payment of tax under the KVAT Act and imposed tax along with penalty. Aggrieved by OIO, the Petitioner filed an appeal before the Joint Commissioner of Commercial Taxes vide order VAT.AP.NO.161/17-18 dated April 26, 2019 ("the Order in Appeal") wherein the Joint Commissioner dismissed the appeal on the ground that PLC/FRC charges are part of taxable turnover under VAT.
Aggrieved by OIA, the Petitioner filed an appeal before the Karnataka Appellate Tribunal ("theKAT"). However, the KAT vide order STA No. 265/2019 dated July 31, 2021("the Impugned Order") upheld the order of the Joint Commissioner stating that PLC/FRC charges would be included in taxable turnover and tax should be levied on the said amount under the KVAT Act.
Aggrieved by the Impugned Order, the Petitioner filed a State Tax Revision Petition ("S.T.R.P.") before the Hon'ble Karnataka High Court.
Whether Prime Location Charges/Floor Rise Charges would be included in Taxable Service under the KVAT Act?
The Hon'ble Karnataka High Court in S.T.R.P No. 47 of 2022held as under:
"(105) "taxable service" means any service provided: (zzzzu) to a buyer, by a builder of a residential complex, or a commercial complex, or any other person authorized by such builder, for providing preferential location or development of such complex but does not include services covered under sub –clauses (zzg), (zzq), (zzzh) and in relation to parking place."
"(37) 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 movable or immovable property;"
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