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Started By: - jagannath prasad - Dated:- 17-10-2016 Last Replied Date:- 18-10-2016 - In residential complex service, if the builder has paid under partial reverse charge for works contract provided by the contractors on the advice of departmental audit and the department has accepted the same then how far is the department correct in demanding proof of material purchased and the proof of VAT paid by the contractor while discharging the remaining 50% of tax liability by the contractors under reve .....

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ing on the residential complex service.Since the contractors were not aware of the rules, they simply purchased building materials from the market and with the help of manpower completed the required job of construction of residential complex of the builder without maintaining any records thereof, more so, because their payment was based on the measurement basis which did not require them to maintain records.There was no formal work orders. every thing was verbal. Therefore, no ill intention on .....

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nt's contention is that if the contractors do not produce the purchase documents and proof of payment of VAT then they will have to pay tax on the full value.How far is department's contention of not agreeing to grant works contract status of the construction work done by the contractor correct in view of the fact that the builder has already paid 50% duty under reverse charge on the same service i.e works contract on the basis of departmental audit? Can tax be charged under reverse char .....

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vice in case the works is original and 70% in case of other than original works. As per section 67 of the Finance Act, 1994 the consideration means amount received by service provider for the service rendered. And as per (Determination of Value) Rules the taxable service amount shall include the value of free issue of material supplied by the service recipient to the provider for incorporating the same in the works contract work. The department refers the valuation rules and seeks information of .....

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After payment of tax by the builder on 50 % of 40%of the total payment made to the contractor as per balance sheet on initiation of the departmental audit, the contractors have paid tax on remaining 50% of 40% of the total amount received by them as per balance sheet. These payments were made in light of audit's observation treating the service to be Works Contract. Now after payment of tax by both the builder as well as the contractor under works contract, the problem is that the department .....

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because ultimate construction of residential complex is not in dispute which could not have been completed without the use of materials and labours by the contractors.And when the use of vat able material as well as labour is evident then the service provided by the contractors is definitely works contract. Demanding full tax from the contractor would also lead to undue enrichment of Government's coffer because the builder has already paid substantial tax under works contract on the insisten .....

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