Karnataka VAT Implications on Real Estate
Sector
PRESENTATION BY-:
CA. SANJAY DHARIWAL
MOBILE NO-9972070601
sanjay@dnsconsulting.net
1
Synopsis
 Introduction
 Works Contract- Legislative History
 WORKS CONTRACT
 Dealer – sec 2 (12) (g)
 Works contract – sec 2 (37)
 Sale – sec 2 (29) (b)
 Time of sale – Sec 7
 Determination of turnover – Rule 3(1) & 3(2) – Regular scheme
 Composition scheme
 Issues and documentation for Joint development
Works contract- legislative history
 What constitute contract of sale and distinguishing from a works
contract – subject matter of litigation in India
 Power of State Government to levy sales tax on
indivisible/composite works contract
 Levy was confined only to levy sales tax on sale or purchase of
goods
 In Gannon Dunkerley-I (SC) stated that WC was an agreement
where property passes from the seller to the buyer under the theory
of accretion i.e In case of an agreement for construction of building,
the property in goods involved in the construction of such building
passed to the buyer of the building not in form of goods but as part
of the building
Works contract- legislative history
 Resulted in avoidance of tax in various ways as divisible contracts




were leviable and indivisible contracts were not leviable
The matter was referred to law commission (61st report)
Accordingly Amendment was made by inserting Article 366(29A)
which includes tax on the transfer of property in goods (whether as
goods or some other form) involved in the execution of a works
contract.
SC in Builder Association considered the challenges to opine that
the amendment was valid. The works contract which was indivisible
by legal fiction can be divided into one for sale of goods and other
for supply of services
Gannon Dunkerley-II laid the critical test for valuation for the
purposes of such levy and states formulated valuation rules.
Raheja Case
 Levy of sales tax in case of property development
 The appellants carried the business of real estate
development and allied contracts
 They enter into development agreement with owners of
lands.
 After approval of plan they construct and enter into
agreements of sale with intended purchasers.
 The agreement also provided that intended purchaser
would also get undivided interest in land also.
 The issue is whether developer is liable to pay sales
tax???????
Analysis of Raheja Case
 The definition of Works contract is very wide
 “Any agreement for carrying out either for cash or for
deferred payment or for any other valuable consideration
the building or construction of any movable and
immovable property”
 The definition does not restrict that construction should be
for owner of property
 Therefore there is levy of sales tax on the agreements
entered prior to the completion of construction
 This decision was against the line of decisions with the tax
payers
 A factual position similar to Raheja came before SC in
L&T
Construction contracts
Analysis of Larsen and Toubro Case (Civil Appeal No 8672 of
2013)
 Two judge bench of L&T doubted the correctness of Raheja case
It was referred for reconsideration to Larger bench for following
reasons
 The developer had undertaken to develop the property of owner.
If the development agreement is not a works contract could the
department rely upon tripartite agreement and consider it as
works contract.
 If ratio of Raheja is accepted then no difference between works
contract and contract for sale of chattel
 The contractor has undertaken work of construction for
prospective flat purchaser
Construction contracts
Analysis of Larsen and Toubro Case (Civil Appeal No 8672 of
2013)
 Arguments placed by petitioners
 As per tripartite agreement main object is to sell and convey
fraction of land together with constructed flat after all the
installments are paid
 The construction is not carried for the purchaser but carried out
by owner to exploit best prices
 The flat is sold as flats and not as aggregate of component parts
 The title to the property is taken only after the work is complete
 The developer will not undertake construction on behalf of flat
buyers, even the constructions are done without pre booking
 The developer is not the contractor of the flat purchaser
Construction contracts
Analysis of Larsen and Toubro Case (Civil Appeal No 8672 of
2013)
 The flat purchaser does not have any role in conceptualizing the
project
 Ownership of material remains with contractor and it passes
only on conveyance of flat.
 Accretion happens in hands of developer and not in hands of
buyer. When constructed flat is transferred or sold it becomes
sale of immovable property and theory of accretion does not
arise.
 The construction linked payment schedule is nothing but a
method of payment of installments.
Construction contracts
Analysis of Larsen and Toubro Case (Civil Appeal No 8672 of
2013)
 Arguments placed by States
 Views taken in Raheja is correct and needs no reconsideration
 Article 366(29A) of Constitution of India has been inserted to
bring remedy arising from decision of Gannon Dunkrely-1 where
levying tax on works contract was unconstitutional
 Three conditions is that there must be works contract, the goods
have been involved in execution of contract and the property in
those goods must have been transferred to a third party either as
goods or in some other form
 The term works contract means a contract in which one of the
parties is obliged to undertake or execute works.
Construction contracts
Analysis of Larsen and Toubro Case (Civil Appeal No 8672 of
2013)
 Arguments placed by States
 There is no question of ascertaining the dominant intention of the
contract as sale of goods element is deemed sale under Article
366(29-A) (b) and can be taxed separately .
 The transfer of immovable property cannot be taxed as sale of
goods but there is no constitutional bar to tax only the sale of
goods element and separately tax the transfer of immovable
property.
Construction contracts
Analysis of Larsen and Toubro Case (Civil Appeal No 8672 of
2013)
 Supreme Court Ruling
 When an agreement is entered into between promoter and the
flat purchaser to construct a flat and eventually sell the flat, the
said activity is works contract.
 All the conditions of works contract are satisfied
 Goods in some other form means goods have ceased to be
chattels or movables and become attached to earth. Therefore
goods which have by incorporation become part of immovable
property are deemed as goods.
 Building contracts are species of the works contract.
 The dominant nature test has no aplication
Construction contracts
Analysis of Larsen and Toubro Case (Civil Appeal No 8672 of
2013)
 Supreme Court Ruling
 In Tripartite agreement between owner of land, the developer
and the flat purchaser it is a composite contract comprising both
works contract and sale of immovable property
 If the builder has undertaken to build for the prospective buyer
and then to that extent it is works contract
 The activity of construction undertaken by the developer would
be works contract only from the stage the developer enters into
a contract with the flat purchaser.
Construction contracts
Analysis of Larsen and Toubro Case (Civil Appeal No 8672 of
2013)
 Supreme Court Ruling
 In Tripartite agreement between owner of land, the developer
and the flat purchaser it is a composite contract comprising both
works contract and sale of immovable property
 If the builder has undertaken to build for the prospective buyer
and then to that extent it is works contract
 The activity of construction undertaken by the developer would
be works contract only from the stage the developer enters into
a contract with the flat purchaser.
Challenges
 Levy of VAT on agreements for sale of under construction
property
 The above decision will lead to double taxation by the contractor
and sub contractor
 There is no principle of accretion by the developer when there is
back to back contract with the contractor but still based on the
above decision even developer is liable to offer the tax under the
VAT law.
 The aspects of Monetary consideration has not been considered
when there is an exchange of land against the super built up
area
 Therefore the construction activity is treated as works contract
and accordingly there will be implication of VAT on the tripate
agreement which also includes landlord share.
KVAT Law for Works Contractor:
Dealer under Sec 2(12)(g) includes a person engaged
in the business of transfer of property in goods
Whether as goods or in some other form Involved in
the execution of a works contract.
Works contract includes - Sec 2 (37) 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
Sale as per sec 2(29)(b) includes a transfer of property
In goods Whether as goods or in some other form
involved in the execution of a works contract;
Time of Sale
 Sale is deemed to taken place at the time of transfer of
title/possession or incorporation of goods in any
works contract irrespective of receipt of payment.
 The sale of goods is deemed to have taken place at the
time of incorporation of goods in the course of
execution of any WC whether or not there is receipt of
money.
 If Tax Invoice is issued within 14 days – sale deemed
to have taken place at the time of issue of Tax Invoice.
Alternately – Tax Invoice or payment – earlier of the
two events will determine the time of sale.
Time of Sale



Notwithstanding anything contained in the Sale of
Goods Act, 1930 For the purpose of this Act, and
subject to section 7(2),the sale of goods shall be
deemed to have taken place at the time of transfer of
title or possession or incorporation of the goods in the
course of execution of any works contract whether or
not there is receipt of payment
Explanation to Rule 3(1) defers taxation of advance
till the commencement of contract
[Both Explanation and section 7 are unconstitutional :
Nagarjuna Construction 2010 (69) Kar. L.J. 97
(HC)
Treatment of Advance Received
 any amount paid as advance to a dealer as a part of
consideration for transfer of property in goods
(whether as goods or in some other form) involved in
the execution of works contract
 Included in the total turnover in the month in which
execution of such works contract commences.
Taxable Event under Works Contract
 The observation of the Supreme Court in Builder’s
Association’s case –
 the taxable event takes place as and when materials
are used or supplied, i.e., incorporating to the
contract in the execution thereof
 every time the incorporation of goods takes place in
the works contract, the taxable event takes place.
rate of Tax
 Section 4
 in respect of transfer of property in goods (whether
as goods or in some other form) involved in the
execution of works contract specified in column (2)
of the Sixth Schedule,
 Subject to Sections 14 and 15 of the CST Act,
1956, at the rates specified in the corresponding
entries in column (3) of the said Schedule.
rate of Tax
 The Sixth Schedule provides class of works contract
liable at 5.5%,14.5%.
 Thus a works contractor will have to pay an output tax
at the rates mentioned in Sixth Schedule in spite of
having purchased materials at different rates of taxes
(like 5.5%, 14.5%)
 Except in case of iron and steel (declared goods),
wherein output tax is payable at the rate of 5% only.
Determination of Total Turnover-Regular scheme
 Total Turnover (Rule 3(1))
 The total amount paid or payable to the dealer as the
consideration for transfer of property in goods (whether as
goods or in some other form) involved in the execution of
works contract including any amount paid as advance to the
dealer as a part of such consideration”
 Explanation to Rule 3(1) – “the amount paid as advance to a
dealer as a part of consideration for transfer of property in
goods involved in execution of works contract shall be
included in his total turnover in the month in which execution
of such works contract commences”
 It means advances received prior to commencement of works
contract shall not be liable to tax under the Act.(Nagarjuna
Construction Case)
Deductions from the total turnover
All amounts collected by way of tax under the act
 All amounts paid to sub-contractors as the consideration
for execution of works contract whether wholly or partly.
Provided that, no such deduction shall be allowed unless
the dealer claiming deduction produces documents in proof
that the sub-contractor is a registered dealer liable to pay
tax under the Act and that the turnover of such amounts is
included in the return filed by such sub contractor.
 Not. No FD 39 CSL 2011 dated 24.8.2011 add the proviso
that provided further that no such deduction shall be made
where deduction of input tax is claimed in respect of tax
paid to any sub contractor.

Deductions from the total turnover
All amounts actually expended towards labour charges
and other like charges not involving any transfer of
property in goods in connection with the execution of
works contract including charges incurred for erection,
installation, fixing, fitting out or commissioning of the
goods used in the execution.(Rule 3(2)(l))
 When labour and other like charges incurred are not
ascertainable from the books of accounts maintained by a
dealer, then such amounts is calculated at the rate specified
in this rule.(Rule 3(2)(m))

Deductions from the total turnover
 Amendment of rule 3.- In the Karnataka Value Added
Tax Rules, 2005 (hereinafter referred to as the said rules),
in sub-rule (2) of rule 3, (1) in clause (m), after the table, the following proviso
shall be inserted, namely: “Provided that where any deduction is allowed under this
clause, then input tax shall not be allowed in respect of
tax paid on charges for obtaining, on hire or otherwise,
machinery and tools and on purchase of consumables,
used in the execution of works contract.” ;
Deductions from the total turnover

Explanation 1 to Rule 3(2)(l) state that In the case of a
dealer executing works contract in determining the taxable
turnover during any tax period, the deduction under clause
(l) shall be allowed so that such deduction is proportionate
to the value of goods, the property in which has been
transferred in the execution of works contract in that
period and if the total turnover is not sufficient to cover
apart from other deductions, such taxable turnover and
such deduction, they shall be determined and allowed
proportionately to the extent of the turnover of the dealer
in that period and the balance shall be carried forward to
the following tax period or any subsequent tax period to be
determined and allowed in the same manner.
Deductions from the total turnover
Explanation 2 to Rule 3(2)(l) state that labour and like
charges include charges for obtaining on hire or otherwise
machinery and tools used in the execution of a works
contract , charges for planning, designing and architect fees,
cost of consumables used in the execution of the works
contract, cost of establishment to the extent relatable to
supply of labour and services and other similar expenses
relatable to supply of labour and services.
• L&T Vs
State of Karnataka (HC) (STRP
8/2006)(2.9.2009)
 Depreciation on plant and machinery is allowed

Deductions from the total turnover
Explanation 3 to Rule 3(2)(l) state that gross profit
earned by a dealer shall be apportionable to the value of
the goods and labour and other like charges involved in the
execution of works contract in the same ratio as in the total
turnover
 Based on explanation I, how the proportionate labour and
like charges will be computed based on ratio of taxable
turnover which will be determined after deduction of
labour and like charges?
 Whether indirect expenses relatable to works contract can
be claimed as labour and like charges?
 How to estimate the gross profit in advance before
completion of the project?

DEDUCTIONS TOWARDS SUB CONTRACTOR
 Rule 3(2) (i-1) states that all amounts paid or payable to sub
contractors as the consideration for execution of works contract
whether wholly or partly.
 Provided that no such deduction shall be allowed unless the dealer
claiming deduction produces document in proof that the sub
contractor is a registered dealer liable to pay the tax under the Act
and the turnover of such amounts is included in the return filed by
such sub contractor.
 Provided further that no such deduction shall be made where
deduction of input tax is claimed in respect of tax paid to any sub
contractor.
DEDUCTIONS TOWARDS SUB CONTRACTOR
Section 15(5)(b) of KVAT Act states that in the case of a dealer
executing works contracts and opting for composition of tax under
sub section (1),
 no tax by way of composition shall be payable on the amounts
payable or paid to a sub contractor as consideration for execution of
works contract whether wholly or partly and such amounts shall be
deducted from the total consideration of the works contracts
 executed on which an amount as notified is payable under sub
section (1) by way of composition in lieu of tax payable under the Act
subject to production of proof that such sub contractor is registered
dealer liable to tax under the Act and that such amounts are
included in the return filed by such sub contractor.

DECLARED GOODS AND WORKS CONTARCT

Based on a constitutional privilege provided to the Central
Government, Section 14 and Section 15 of the CST Act has been
enacted, to identify what is called “Declared Goods “ or goods of
Special importance. Such goods cannot be put to tax beyond 5%.
In case of M/S NAGARJUNA CONSTRUCTION AND OTHER
DEALERS VS STATE OF KARNATAKA ((WRIT PETITION 2993233/2009)(T-KST)AND OTHERS (HC), The petitioners had filed the
writ petition before the High Court to challenge the constitutional
validity of section 4(1)(C ) and Schedule VI, Item 23 of the KVAT Act
2003 and the Explanation appended to Rule 3(1) of the KVAT Rules
2005.
 Circular 13/2009

URD PURCHASES
 Though tax at 12.5% is applicable under serial Number 23
of the sixth schedule of the Act in respect of composite
works contracts involving transfer of property in goods, an
exception is provided in section 4(1)( C) of the KVAT Act
itself, that in respect of declared goods involved in the
execution of works contracts, the rate of tax shall be as
provided in section 14 of the CST Act at 4%.
 Thus as regards iron and steel products used in execution
of works contract, the levy of tax shall be at 5% only on the
value thereof.
 State of Karnataka v/s Mahaveer Willow JP Nagar 6th phase
Bangalore 2014 78 Kar L.J 305 (HC) (DB) dated 13.2.2014
Composition dealer – Section 15
 Applicable to dealers of various kinds like, notified dealer
upto 50 lakh(Currently it is 25 lakh)
 Works Contractor,
 Hotelier, Restaurateur, Caterer, Sweet meat stall,, Ice cream
Parlor, bakery , or other class of dealers as notified
 Mechanized crushing unit producing granite or any other
metal, etc.
Composition dealer – Section 15
Notification :
Notification No FD 116 CSL 2006(13), Bangalore dated
31.3.2006
1. In respect of a dealer executing works contract at the rate
of four percent on the total consideration for the works
contract executed by him
Composition dealer – Section 15
Composition scheme – Works contractor
• The law allows such scheme to a dealer executing
•
•
•
•
3
6
Works Contract irrespective of his turnover.
Such civil works contractor can collect Composition
tax
Input tax credit is not permissible.
Rate of tax at 4% on Gross consideration(Receipts)
Actual or Adhoc deductions towards labour not
allowed
• Tax on Interstate purchase at local rate
• Deductions towards subcontractor payment
• URD tax with effect from 01.04.2006
• Issue of Bill of sale
• Option for composition for one eligible business
even if other business is non composition (Retail
business and not works contract business)
3
7
Particulars
Amount
BASIC DATA
Contract Receipt during the month
3
8
5000
URD Purchases @ 5%(assume)
600
URD Purchases @ 14%(assume)
750
Interstate purchase(5% assume)
1000
Interstate purchase (14% assume)
400
Sub Contractor payments
700
Computation of composition tax
Particulars
Contract Receipt during the month
Amount
Tax payable
5000
Less
Sub Contractor payments
700
Interstate purchase(5%)
1000
Interstate purchase (14%)
Turnover for tax
400
2900
Composition tax(4%)
116
Add
URD Purchases @ 5%
600
30
URD Purchases @ 14%
750
105
1000
50
400
56
Interstate purchase(5%)
Interstate purchase (14%)
3
9
Total tax payable
357
4
0
Voluntary withdrawal from COT scheme :
In order to avoid frequent changes from full VAT to
Composition, there is a restriction of a minimum retention
of 12 months as a registered dealer under full VAT; If tax is
being paid under regular scheme, at least 12 months tax
under regular scheme must be paid. He should not be
registered under composition scheme during the preceding
period of 12 months.
Dealer has to be in composition scheme for at least 12
months and then he may shift to regular scheme.
Dealer can make payment of tax under regular scheme
immediately succeeding the month in which he withdrew
from composition scheme.
Dealer need not to wait for any certificate from the
jurisdictional Local VAT officer.
Tax issues
 WC cannot purchase capital goods from outside the State;
 WC cannot sell goods outside the State but can stock transfer
to a place outside the State [Refer wordings of Rule 135(5)]
 Dealer is liable to pay tax on the value of goods at the
appropriate rate specified in section 4 (at 1%, 4%, 5%,
13.5%,14.5% etc.)
 and such value of goods shall be deducted from the total
consideration of works contracts. Department contends that
value of goods means “Sale price” of such goods
Composition dealer
 If a works contractor who has opted to pay tax under the
composition scheme subsequently sells away the goods
purchased by him (other than by way of transfer of property
in such goods [whether as goods or in some other form]) he
will be liable to pay tax on the value of such goods at the
rate specified in section 4 without any input tax set off.
LAND DEDUCTION
 Deduction of land cost:
Transaction in land does not attract VAT being an immovable
property.
 Difficult to claim land deduction in case of single contracts –unless
value separately mentioned.
 However issue is around the value to be adopted towards the land
 Market value as on the agreement date
 Future sale value -as on the sale deed date, Procurement cost,
Guidance value
 High scrutiny of value of contract attributed to the land portion
likely -advisable to document basis for valuation of land.
 Challenge also in appropriating initial payments towards value of
land and value of construction
 Price sheet and terms in the Agreement crucial

PARTICULARS
REGUALAR SCHEME
COMPOSITION SCHEME
126150000
126150000
145
145
870000
870000
SALE CONSIDERATION
FLATS FOR SALE
145
LANDLORD SHARE
38
OWNED SHARE
17
TOTAL FLATS
TOTAL CONSIDERATION( 145
flats)
TOTAL FLATS
TOTAL FLATS COST
200
PARTICULARS
REGUALAR SCHEME
COMPOSITION SCHEME
870000
870000
14.50%
4.00%
LAND COST PER FLAT(37.5%)
(CIRCULAR FOR JD-VAT)
CONSTRUCTION COST PER
FLAT
RATE OF TAX
LABOUR AND LIKE CHARGES
(ADHOC)
SUB CONTRACTOR
DEDUCTIONS (Registered)
30%
231000
100000
100000
UNREGISTERED
PURCHASE(20%)
174000
INTERSTATE PURCHASE(15%)
130500
TAXABLE TURNOVER
VAT TAX AND COMPOSITION
TAX
539000
639500
78155
25580
PARTICULARS
REGUALAR SCHEME
INTERSTATE PURCHASE TAX
COMPOSITION SCHEME
18923
UNREGISTERED TAX
9570
INPUT TAX CREDIT
14.5% PURCHASE
21750
5.5% PURCHASE
4125
INTERSTATE PURCHASE (NO
CREDIT)
NET TAX PAYABLE PER FLAT
NUMBER OF FLATS
TOTAL NET TAX PAYABLE
52280
54073
145
145
7580600
7840513
Construction contracts
 Commissioner Circular- December 2009
 Circular 11/2009
 Sale consideration towards undivided interest in land is
always excludible
 Deduction towards sub contractor for 2005-2006 is also
allowable
 Carrying forward of unadjusted deductions towards labour
and like charges to next tax period or next year
 Amounts collected as BWSSB and KPTCL deposits, stamp
duty, etc. Most of the builders and developers collect
amounts from customers towards BWSSB and KPTCL
deposits, stamp duty, registration fee, service tax, etc.
Construction contracts
 Commissioner Circular- December 2009
Circular 12/2009
 Agreements for sale of constructed building : Reference of
K Raheja Development Corporation Vs State of
Karnataka (reported in 141 STC 298)
 Agreements for sale of constructed buildings –
Department has clarified that any kind of agreement
entered by the developer before completion of
construction would amount to works contract.
 (K Raheja Judgment still holds good.
 (L & T judgment not referred)
 Analysis of K Raheja and L& T
Circular No.12 /2009-10
 While
determining the taxable turnover, amount
received towards UDI from the customer is claimed as
deduction;
 In the circular it is stated that the agreement between
the land owner and the developer towards construction
of building(s) amounts to works contract.
 Both Regular and Composition dealers are subject to
tax in respect of Joint Development agreement to the
extent of land obtained from the land owner.
 The amount received from the customer towards UDI
shall be construed as amount received from the land
owner towards construction of his share in the project;
Circular No. 12 /2009-10
 In case the UDI portion is not determinable then the
value declared with the appropriate authorities
should be considered;
 In case the value of UDI is not declared separately at
the time of registration, then the amount fixed under
the relevant law should be considered.
 In the hands of the Land Owner:
 The aggregate amount received from his customer
by the developer on behalf of the land owner
 The aggregate amount declared by the developer to
be the value of UDI land transferred to the customers
with whom he has entered into an agreement;
Circular No. 12 /2009-10
 The aggregate amount fixed under the relevant law
as the value of UDI land transferred to the customer
with whom he has entered into construction
agreement.
Commissioner Circular 12/2009
Assessment of tax in cases of Joint development agreements
 Developer will be liable on the transfer of property in goods
involved in execution of such civil works contract of
construction of building
 Developer declares only the part of the amount received from
the customers
 He would not declare the balance amount towards transfer of
UDS against the built up area to landowner
 As no consideration is received no tax is offered on landlord
share
 On the date of handing over possession of the landowner share
 If landlord entered agreements then landlord also can offer the
tax
JUDICIAL DECISIONS
 Krishvi Projects Private Limited Bangalore Vs State of
Karnataka 2014(78) Kar.L.J. 307 (HC)(DB) dated 13.2.2014/
Vaswani Estate Developers Private Limited Bangalore Vs State
of Karnataka (HC) (DB) dated 17/2/2014

 Issues raised by Division bench in case of Joint development
agreement between the owner and the builder wherein landowner
delivers piece of land and builder in consideration thereof has to
construct the apartments and deliver to landlord in the ratio agreed.
Prima question to be answered is who is liable to pay tax on the
materials used in the execution of the contract. Undisputed fact is
that these questions not considered and answered by the tribunal.
It is held that these matters remanded back to Karnataka Appellate
Tribunal with a direction to consider these questions.
JUDICIAL DECISIONS
Questions:
 Whether the land price will get included in the amount of total
receipt on the occasion of paying tax as per composition scheme in
building works contract?
 Whether the nature of transactions/joint development agreement
between the landowner and the developer in the present case
would oblige either of them to pay tax on the transfer of goods
involved in the execution of works contract in respect of developer
share and or landlord share and if yes who has to pay tax?
JUDICIAL DECISIONS
 Questions:
 Whether the transaction/joint development agreement between the
landowner and the developer is a barter by which the landowner
delivers the agreed upon share of the land to the builder and in
consideration thereof requires the builder to construct apartments in
his (landowner) share of land and deliver to him as a part of
consideration amount to sale within the definition of section 2(29) of
KVAT Act 2003 and if yes who is liable to pay tax on the
material/goods involved in execution of the works contract?
Tax issues
 Development charges- Continental Builders case- liable







to VAT to the extent of material transferred.
Revenue sharing models
Sales return for works contract
Agreement to sale/Sale Agreement/Joint development
agreement- Effect of taxes
Deduction for undivided share of interest in land
Restriction of input tax credit and sub contractor
pertaining to landowner share?
Whether exchange of land against the constructed area
liable to tax?
Monthly Assessments/Time of raising Invoice by
Works contractor
TAX ISSUES
 Whether Composition tax be paid on the Gross amount or





after deduction of land cost ?.
What is the land value be deducted – as per guided value or
market value based on certificate issued by Chartered
Engineer ?.
Whether VAT is payable on the portion of the owners share
as on the date of handing over possession of the building to
the owner in case of JDA ?.
How to compute the consideration of land value in case of
joint development of property ?.
In case of JDA, how the input tax credit be accounted for ?.
In case of reversal of the input tax portion relating to land
owner under JDA, what is the method of calculation for
reversal ?.
Thank you
sanjay@dnsconsulting.net
5
8