Vat or works contract tax of government (mainly cpwd & bsnl)
Divya
(Querist) 20 February 2013
This query is : Resolved
Respected Experts
This refers to works contract undertaken by father in Maharashtra (contractor is a registered sales tax dealer)
Contractor undertakes civil construction projects of making buildings for BSNL & CPWD and in all cases, the flats after construction are not sold, they are made for the internal use of BSNL & CPWD employees.
Agents cum Principal Contractor BSNL & CPWD, deduct TDS @ 2% from the bills on the taxable turnover and issue certificates.. All these assessments of work done relate to period 1993 to 2000.
after 2002, sales tax authorities impose assessment orders and finally now they say to pay tax liability running into several crores. They use their own mechanics to calculate & charge tax @ 10-15% with penalty on turnover.
for us it is the works contract, why are tax authorities giving it the shape of MVAT 2002....BSNL & CPWD works contract come under "Works contract tax"
Can sales tax authorities re-burden us with taxes, why should the burden not be put on BSNL/CPWD...They are the principal contractors, hence they should be made answerable too.
My basic query is "government contractors" have already got 2% tax deducted at source from BSNL & CPWD, so why are again burdened.
Please assist with your valuable input.
Raj Kumar Makkad
(Expert) 20 February 2013
You are right. the burden should e upon the principal contractor and not upon you so make representation in this regard.
Divya
(Querist) 20 February 2013
Thankyou Sir, for ur immediate reply...
Please clarify:
as per manuals, its said that "CPWD & BSNL" are both agents of goverment and person erecting structure is the contractor...
But i say legally, an agent in such cases is the principal contractor as they are answerable to the government and people who build structures are actually sub-contractors as they report to BSNL & CPWD...
Please confirm my thoughts if true legally & logically.
Thankyou
Raj Kumar Makkad
(Expert) 20 February 2013
Your logic is praiseworthy as already replied. You make a representation failing which file a writ petition before high court on the same logic.
Anirudh
(Expert) 20 February 2013
Dear Divya,
You would love every answer which is palatable to you and favourable to you.
What is important is to see whether there is any legal basis for such answers.
First and foremost, prior to October 2000, BSNL was not there. It was Department of Telecom.
Therefore, Department of Telecom and CPWD are Government. They are not agents of Govt.
Therefore where does it leave you? How can you say that DOT and CPWD are 'Agents' / Principal Contractors of Govt?
If this first step of yours is wrong (no matter which expert with or without adequate knowledge, supports you) please take it your next step based on such wrong step can never be correct.
Divya
(Querist) 20 February 2013
sIR (aNIRUDH)
Thankyou for ur clarificatns....But i have further doubts which u can throw a light on...
BSNL is govt of india enterprise & if BSNL is govt, then why r they payng taxes in crores for telecom in karnataka....If BSNL is govt , then GOI shud directly start giving tenders, why is BSNL kept as middle party??
The Central Public Works Department (CPWD) is a 157 year old institution and is the principal agency of the Government of India responsible for creating assets
as well as other structures of various ministries and departments of Government of India and other autonomous bodies and public sector enterprises"
When i say agency means an agent, i guess?? if you have further insight or clarity pls do tell me.
Anirudh
(Expert) 21 February 2013
Dear Divvya,
Let me answer you point by point.
1. You indicated in your original post that the matter relates to the period 1993 to 2000. I had pointed out to you that BSNL came into being only from 1.10.2000 and therefore for major portion of your period, BSNL was not there. It was a Department of Telecom. Therefore DOT is nothing but a government itself. THEREFORE THE QUESTION OF ONE ARM OF THE GOVT. BEING AN AGENT OF THE GOVT. DOES NOT AT ALL ARISE.
LET ME GIVE YOU AN EXEMPLE: If your right hand does something, it will be Divvya doing the thing and not the Right hand being the Agent of Divvya doing the said thing.
So therefore your theory that the organizations (DOT and CPWD) are agents of Govt. and therefore they are principal contractors goes for a sixer!
2. Similarly, if CPWD was there for 157 years so what. It is the part of the Govt. CPWD does not become an Agent of the Govt.
Without understanding these nuances if some expert gives you an answer which is favourable to you please do not feel happy.
As you are rightly questioning me to explain why I say what I say, feel free to ask and question every expert in this LCI as to what is the legal basis for what they are saying.
These organizations (CPWD or whatever) during the relevant point of time, being an employer of the Contractor for getting some works contract executed, at the time of making payment might have deducted TDS as per the applicable percentage and might have remitted the said amount to the respective Govt. (Maharashtra in your case). There liability and responsibility ends there. The TDS deducted by them is only a small fraction of whatever tax that is ultimately payable by the contractor. The twin object of such TDS is (i) to keep tab of the works that have been carried out and (ii) recover some amount of tax quickly.
However, the responsibility of the contractor who executes the works-contract exists. He has to submit his returns, pay the taxes that is due to the Government/Sales Tax Department, ofcourse after adjusting/taking credit of the TDS already deducted in his case.
If the contractor has not discharged his tax liability, naturally the sales tax department will come after him and nobody else.
R K JAIN
(Expert) 23 February 2013
Contractee deduct the TDS(Tax deduction at source)from contractor. Liability of contractee ceases after deduction of tax. Any demand of tax will be borne by contractor as and when demanded by the taxing authority. In your case BSNL and CPWD are contractee and they are not liable for tax since their duty ends with the deduction of TDS. Contractor has to pay the balance tax if any after adjusting the TDS. Liability of TDS and liability of payment of tax are different things. I think, You are mixing both the things.
Anirudh
(Expert) 23 February 2013
But Mr. Jain, there are other Experts in this LCI who say the querist is right!
R K JAIN
(Expert) 23 February 2013
Dear Anirudh, every one is free to give his opinion. It is not necessary that every one will be satisfied with the opinion.
Divya
(Querist) 23 February 2013
Sir,
I respect everyone's opinions...But my points are different...Agree that they are govt. deprtmnts & agree works contract is tax liability..
But :
1) first & foremost bureaucracy in govt deptrmnts where no crystal clear guidelines..
2) TDS is going from contractor, where is govt paying anything to Treasury of Contry's tax..
3) SC had cme out wid "Builders associatn vs UOI" for works contract under construction ....But i am trying to put forth a very diffrtn logic, which i am keen to put before our Apex Court....Thrz a diffrcne between builders & govt contractors.. Proper guidelines r missing & this allows more space for bribe...
4) I would just conclude that just because decns have been passed in past or people hv been following blindly or not raised qstns - all this does not stop us from questioning our court's ;logic...May be diffrnt aspects can come out..
Lastly, I respect the opinion of experts for throwing clarity from their exprnce persptcve.
R K JAIN
(Expert) 23 February 2013
We have to follow the Act and any provision made under the act is against the view of Constitution of India then that act or the provision of the act will be struck down by the court. At the time of contract between the govt and contractor, it should be clearly mentioned in the contract that any tax liability in future will be paid by the contractee. At the time of taking the contract the contractor bows down to the Govt to catch the contract and never think about the future liability and later on blame to the Govt and the policies laid down by the bureaucracy.
Anirudh
(Expert) 23 February 2013
Dear Divvya,
No court has so far given any decision or others have accepted such a decision blindly. And no one is expecting you to follow any decision blindly as others have done. You have every right to think differently and to agitate at the highest forum. No doubt about that.
But please remember, the Courts have given decisions interpreting the provisions of law as it exists today and others have accepted those decisions. (You may differ and you may agitate - you have every right to do)
Whereas, you are trying to get a law what in your opinion it ought to be.
Unless the law which you expects comes into existence, your views cannot prevail. Only after the law as required by you comes into existence, the earlier decisions by the court will have no value. Otherwise they will hold the field.
Divya
(Querist) 25 February 2013
Respected Sir/s
Some important links related to CPWD works contract..I am sharing this info such such logic should ideally apply to all govt. contracts on construction....I am in real need of ur inputs:
http://www.cpwd.gov.in/newsitem/salestax.pdf
http://www.cpwd.gov.in/newsitem/LevyOfSales.pdf
Thankyou
Anirudh
(Expert) 27 February 2013
How does the above two links help your case? Please explain.
