No tax to be levied on the turnover of subcontractor-RVAT
On 23-06-2015, CIRCULAR- No. 06/2015-16- No. F.16 (97)/Tax/CCT/14-15/5929 has been issued by the RVAT authorities, clarifying that where a registered dealer commonly known as developer/ builder who, as works contractor, undertake the construction of flats, dwellings or buildings or premises and transfer them along with goods (whether as goods or in some other form) and land or interest underlying the land in pursuance of an agreement, has opted for payment in lump sum in lieu of tax under any notification issued in this regard, awards whole or part of the work for which he has opted for payment of lump sum in lieu of tax to a sub-contractor, no tax shall be levied on the turnover of such sub-contract subject to the condition as mentioned in proviso to sub-rule (6) of rule 22A of the RVAT Rules.
Before this clarification, the Rule 22A(6), provides for the deduction of turnover of sub-contractor, only in case of main contractor.
The old rule 22A(6) is stated as under-
Where a works contractor who has exercised option of exemption fee under a notification issued under sub-section (3) of section 8 of the Act or has opted for payment in lump sum in lieu of tax, awards whole or part of such contract to a sub-contractor, while determining the taxable turnover of subcontractor apart from deduction provided under subrule (1), the turnover of transfer of property in goods involved in execution of such sub-contract, shall be deducted.
Further, the condition provided in Sub rule 6 is- the sub-contractor shall purchase goods from within the State, for execution of the work contract, from a registered dealer of the State, and in case of use of any goods in the execution of the work contract, which is procured or purchased from a dealer other than the registered dealer of the State, the sub-contractor shall be liable to pay an amount equal to the amount of tax that would have been payable had the goods been purchased in the State from a registered dealer.