In Pursuit of Knowledge

TDS Obligations on Works Contract in Assam and Taxation of Intellectual Property Rights under VAT in Goa and Rajasthan

Assam – by Dr. Ashok Saraf, Sr. Advocate

  1. Reference to provisions of Act/Rules

Section 47 of the Assam Value Added Tax Act, 2003 and Rule 28 of Assam VAT Act, Rules.

  1. Who are liable to deduct tax

Every person other than: (a) an individual, (b) A Hindu Undivided Family, (c) a firm, and (d) a Company not under the control of Government, responsible for making any payment or discharging any liability on account of any amount purporting to be full or part payment of sale price or consideration for the transfer of property in goods (whether as goods or in some other form) involved in the execution of Works Contract.

  1. When liable

Every person responsible for paying sale price or consideration or any amount purporting to be the full or part payment of sale price or consideration in respect of any sale or supply of goods liable to tax under the Assam Value Added Act, 2003 to the Government or Corporation, Board, Authority, Undertaking or any other body by whatever name called, owned, financed or controlled wholly or substantially by the Government, shall deduct an amount of TDS from such sum towards full satisfaction of the tax payable under the Value Added Tax Act on account of total sale price of such sale or supply.

  1. When to be deducted

At the time of credit of account of or payment to the dealer or the ‘contractor’.

  1. Rate of TDS

12.5% of the taxable turnover of works contract.

  1. Any Tax Deduction Account No. to be obtained by deductor

Every person responsible to deduct tax has to apply for allotment of Sales Tax Deduction Account No. in Form 33 within 15 days from the date of entering into any contract relating to supply of goods or execution of works contract or for transfer of right to use any goods.

  1. Issuance of Tax Deduction No.

The Tax Deduction No. shall be issued in Form No. 34. One Tax Deduction No. shall be applicable for all units/office of the person responsible for deduction of tax.

  1. Any scheme for lower or no deduction

By making application in Form 30 the contractor can obtain certificate in Form 31 from department certifying for no deduction or justifying deduction only on a part of works contract where the contract involves only labour and services or both transfer of property in goods and labour and services

  1. On which amount to deduct

On the taxable turnover of the works contract.

  1. When to pay the TDS

Within 10 days from end of the month in which tax is deducted by the appropriate challan in Form No. 25.

  1. Any certificate of TDS to be issued to the dealer from whom tax has been deducted

The person who deducts tax or deposits the amount of tax into the designated bank shall issue a certificate of tax deducted in Form 29 in duplicate along with an attested copy of the challan to the dealer within seven days from the date of the deposit of the amount deducted from the payment made to the dealer.

  1. Any other returns required to be filed

Every person responsible for deduction of tax shall file a return in Form 35 within two months from the end of each year before the prescribed authority.

  1. Any other details the deductor has to maintain

Person liable for deduction of tax has to maintain for each year a separate account in Form 36 showing the amount of tax deducted, certificate of tax deduction issued and the particulars of remittance made to the Government account.

  1. What are the consequences for failure to deduct tax etc.

  1. No interest or penalty shall be imposed or no recovery proceedings against the dealer or payee shall be initiated in respect of deduction of tax.
     

  2. When amount deducted is not deposited by the deductor after deduction such amount shall be a charge upon all the assets of the person concerned who made deduction and shall be recoverable from him as arrears of Land Revenue. Penalty of a sum not exceeding twice the amount deductible shall also apply. Interest @ one and half per cent per month will also apply.

  1. When amount is found to be deducted in excess

The amount deducted in excess shall be refunded to the dealer.

Goa — by Ashish V. Prabhu Verlekar,
Chartered Accountant

  1. Under the Goa Value Added Tax Act, 2005, there is no definition of meaning of IPR. It should be understood as per common parlance and in the light of cases decided so far.
     

  2. IPR is taxable at 4% under Entry 4 of Schedule B wef 1-4-2005 read as under:

“All intangible goods like copyright, patent, rep licence, exim scrips, SIL licences.”

This entry no. 4 was substituted wef 1-4-2006 as under:

“All intangible goods or goods of incorporeal nature like copyright, patent, rep licence, exim scrips, SIL licences, trade marks, import licences, export permits or licences or quota, software package, credit of duty entitlement pass book, technical know how, goodwill, designs registered under the Designs Act, 2000 (Central Act 16 of 2000), sim card used in mobile phones and franchisee, that is to say, an agreement by which the franchisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified or associated with the franchisee, whether or not a trade mark, service mark, trade name or logo or any symbol, as the case may be.”

  1. None of the items covered under IPR are exempted under Schedule D. There is no provision under the Goa Value Added Tax Act, 2005 to exempt any goods by notification. Under section 6 of the Act, tax collected by specialized agencies of United Nations Organizations or Diplomatic mission/ consulate or embassies of any other country and their diplomats shall be reimbursed in such manner and subject to such conditions as may be prescribed. So far, such conditions are not prescribed.
     

  2. The tax rate on lease of IPR was 12.50% for 1-4-2005 to 31-3-2006 and @ 4% from 1-4-2006 under entry No. 102 which reads as under:

“Lease rentals in respect of transfer of right to use any goods for any purpose, whether or not, for a specified period.”

  1. Under section 9 of the Goa Value Added Tax Act, 2005 read with rule 7 of the Goa Value Added Tax Rules, 2005 input tax credit is admissible on tax paid and supported by tax invoice in proof of payment of tax.

If such goods, where input tax credit is availed and subsequently, the said goods are not sold due to theft or destruction or remain unsold at the time of closure of business or they are given away by way of free samples or gifts, then input tax credit will not be allowed, and the said input tax credit will be reversed.

  1. There are no judicial decisions or determination/advance ruling orders taken/issued so far on IPR by Goa Commercial Tax Department.

Rajasthan – by M. L. Patodi, Advocate

  1. There is no specific definition of Intellectual Property Rights (IPR) given under the Rajasthan Value Added Tax Act, 2003. However, the other relevant definitions are as under :

  1. Sec. 2(15) : “goods” means all kinds of movable property, whether tangible or intangible, other than newspapers, money, actionable claims, stocks, shares and securities and includes materials, articles and commodities used in any form in the execution of works contract, livestock and all other things attached to or forming part of the land which is agreed to be served before sales or under the contract of sale.
     

  2. Sec. 2(19) : “lease” means any agreement or arrangement whereby the right to use any goods for any purpose is transferred by one person to another whether or not for a specified period for cash, deferred payment or other valuable consideration without the transfer of ownership, and includes a sub-lease but does not include any transfer on hire purchase or any system of payment by installments.
     

  3. Sec. 2(20) : “lesee” means any person to whom the right to use any goods for any purpose is transferred under a lease.
    iv. Sec. 2(21) : “lessor” means any person by whom the right to use any goods for any purpose is transferred under a lease.

  1. The Entry No. 3 of Schedule IV of the Rajasthan Value Added Tax Act, 2003 prescribes the rate of 4% on following goods. The entry and the relevant Notification issued under reads as under :

    Entry No. Particulars Rate of tax
    3 of Schedule IV

    All intangible goods like Copy Right, Patent, REP Licence etc.

    		4% 1-4-2006 to till date

The Govt. of Rajasthan has issued a notification u/s 8(5) of the CST Act on 19-4-2006 under which “Duty Entitlement Pass Book, Special Import Licence, REP Licence and Exim Scrips, Non Quota Entitlement, Part Performance Entitlement” prescribing the reduced rate of tax @ 0.5% against `C’/ `D’ form under the CST Act w.e.f. 19-4-2006.

The above Notification has been amended vide Notification No. F.12(63)FD/Tax/2005-58 dated 1-6-2006 is reproduced as under :

“Amendment

In the said Notification, for the existing expression “Duty Entitlement Pass Book, Special Import Licence, REP Licence and Exim Scrips, Non Quota Entitlement, Part Performance Entitlement” the expression “all types of Duty Entitlement Scrips/ instruments issued by the Government of India under Foreign Trade Policy,” shall be substituted.”

  1. No, there is no exemption available on purchase & sale of IPR under the Rajasthan Value Added Tax Act, 2003.
     

  2. There is no difference on sale/lease of IPR. The rate of tax on normal sale of IPR and lease of IPR is same; i.e., @ 4%.
     

  3. The sale of IPR is a normal sale and according to sec. 18 of the Rajasthan Value Added Tax Act, 2003, Input Tax Credit is available. The relevant sec. is reproduced below:

“Sec. 18 – Input Tax Credit

  1. Input Tax Credit shall be allowed to registered dealers, other than the dealers covered by sub-section (2) of section 3 or section 5, in respect of purchase of any taxable goods made within the State from a registered dealer to the extent and in such manner as may be prescribed, for the purpose of –

  1. sale within the State of Rajasthan; or

  2. sale in the course of inter-State trade and commerce; or

sale in the course of export outside the territory of India; or
...
...

  1. being used in the State as capital goods.

The provision of Input Tax Credit relating to lease are as under :

Rule 18(3) : Input Tax Credit in respect of raw material used in the manufacture of taxable goods given on lease, shall be available to the lessor in twelve equal monthly instalments commencing from the month of issuance of first VAT Invoice in respect of such lease.

Rule 18(4) : Input Tax Credit in respect of taxable goods given on lease, shall be available to the lessor in twelve equal monthly instalments commencing from the month of issuance of first VAT Invoice in respect of such lease.

Rule 18(5) : Input Tax Credit to the lessee in respect of lease money of capital goods shall be available in the tax period in which the original VAT invoice has been received.

Rule 18(6) : The Input Tax Credit under this rule shall be available on the basis of books of account and records of the dealer. Where, the amount of input tax credit is not determinable from the books of accounts of the dealer, the amount of input tax credit shall be allowed proportionate to the extent for the purposes specified in sub-section (1) of section 18 of the Act.

  1. No, there are no important decisions relating to I P R in the state.