Thursday, June 4, 2009

VAT ON FLAT PURCHASE

Recently a news item was published in the Assam Tribune under the caption “H.C. rejects VAT on Flat purchase”. Quoting a release issued by Assam Real Estate & Infrastrure Development Association, the release said that a Division Bench of the Gauhati High Court ordered the Commissioner of Taxes, Assam not to impose VAT on the purchase of Flats. The release added that recently the tax department started raids demanding that all Flat purchasers are liable to pay VAT with retrospective effect from May, 2005.The fundamental concept of VAT, as envisaged in the preamble of the VAT Law, is that it related to the imposition and collection of tax on the sales or purchases of goods in the State of Assam. Sales and purchases are, in fact, co-related. When there is purchase there is sale and vice versa. No dispute is existent on this concept of law. The basic question is, however, what is goods? ‘Goods’, as defined in the VAT Law means- all materials, commodities and articles and all other kinds of moveable property, whether tangible or intangible and includes, inter-alia, all materials (whether as goods or in some other form) involved in the execution of works contracts. ‘Flat’, as occurred in Oxford Dictionary, means- a set of rooms forming an individual home within a larger building. ‘Building’, on the other hand, is a structure with roof and walls with all requisite amenities and facilities. It is, therefore, a fixed asset and not a moveable property and naturally, it does not come under the purview of the definition of goods. A Flat is conclusively nothing but an immoveable property and as such the definition of goods is not attracted. The order, issued by the Commissioner of Taxes, if any, is thus not within the ambit and competence. The taxing authorities, as appointed by the Government to assist the Commissioner are well competent to decide the merit of any such pertinent question of law and any imposition made at any corner on the statutory power exercise scenario seems to be an overlapping of jurisdiction or intervening of the powers. The unfortunate part of thing is that even though the Commissioner is said to have directed the taxing authorities to imposed VAT on purchases of Flat with a retrospective effect from May, 2005, that is, from the date of coming into force of the VAT Law in Assam, he has not equipped the taxing authorities, namely; the Assistant Commissioners of Taxes and the Superintendents of Taxes to exercise the powers for registration of the dealers liable to pay tax under the VAT Law, to make assessments of tax to the dealers (except the power of self- assessment) and other allied important powers in the day to day administrative scenarios. The officers, on the other hand, are either without having being unaware of this vital requirements or without being conscious at all on the consequential effect on such unvested power exercise, keen to exercise such unvested powers in the course of their routine course of action presumably without any conviction of mind that the whole administrative system will be paralyzed. When it is well settled from the above concept of law that Flat is not a moveable property and out side the definition of goods, the scope for levy of tax on Flat purchase is not there.The definition of goods, inter-alia’ laid down that all materials (whether as goods or in other forms) involved in execution of works contract are goods. If the construction of Flats are constructed through the contractors, naturally, the transfer of property in goods involved in such works contract is covered by the definition of sale, which has its obvious Constitutional footings with proper authority of law and the levy of tax on such goods is well attracted. The promoter of the Flats, however, generally come up with strong plea that they construct the Flats out of their own and the question of execution of works contract does not crop up. The actual state of affairs will come to the light on the nature of contract in course of scrutiny and examination of the contract deeds executed between the land ‘owner and the promoter’ and ‘the promoter and the flat purchasers’. It can not be fully agreed that the promoters alone play the pivotal role in the entire Flat construction exercise and there may be some agencies as well to act as contractors. That will be a product of investigation and vigilance. The taxing authorities, it is presumed have the access to some investigation and vigilance.The materials used or utilized in connection with the construction of Flat are, no doubt, out of the purchases made locally or in the course of inter-State trade or commerce. The taxing authorities have the power to examine the documents and evidences to ascertain whether VAT has been charged against such purchases of goods by the sellers to proceed with as part of duty to ensure charging, payment and levy of tax properly, when such purchased of materials relates to within the State of Assam. If any such goods, covered by the Schedule of the Assam Entry Tax Act, 2008 are purchased from places out side the State of Assam for use or consumption, the taxing authorities have full power to undertake operation in the matter of deciding the liabilities under the said Act and to ensure proper levy and collection of tax. The taxation laws have provided ample powers to the taxing authorities, but such powers are to be exercised within the frame-work of law. Any powers exercised arbitrarily beyond the ambit and competence invites controversy and naturally a catastrophe in the revenue earning exercise becomes inevitable.

Mrinal Kanti Chakrabartty
“Rudra Bhawan”R.G. Barua Road, 10-Lakhimipath,Guwahati-781024
Mobile: 098642-01684

2 comments:

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