Vat
d. chandra sekhar
(Querist) 31 December 2012
This query is : Resolved
The dealers engaged in the business of trading in hardware items. The dealer has supplied material to the contactors engaged by he unit of SEZ for setting up of SEZ units in the processing areas of Special Economic Zone and the dealer has not collected any vat on the sales made to the contractors basing on the certificate issued by the commissioner of SEZ and declared as zero rated sales.
During the course of vat audit the CTO treated these zero rated sales as taxable sales and raised tax as prescribed under APVAT ACT on the ground that as per section 7A of the AP VAT ACT exemption only to the sales made unit of SEZ located in the processing zone or developing of the SEZ.
And also stated that section 7a of ap vat act was inserted on 24.09.2008 subsequent to the entry 59A which was added to the Schedule on 01.06.2008, the provisions of Section 7A prevail over the entry 59A of the schedule of the AP VAT Act. Hence, the sales made by a dealer to contactor are not available for exemption. Accordingly exemption is proposed to be disallowed and same will be subjected to tax @ 14.5%.
Question:
1. Contractors engaged by the Units of SEZ for setting up of SEZ units are also liable to pay VAT under VAT Act.
2. The dealer has supplied the material basing on the certificate issued by the Commissioner of SEZ without collecting the VAT. What is the validity of certificate of SEZ Commissioner.
3. Please advise, and also provide any case laws in support.
R K JAIN
(Expert) 31 December 2012
If contractor is holding the certificate of exemption from commissioner then the sale will be tax free otherwise taxable.
Raj Kumar Makkad
(Expert) 02 January 2013
1. Yes.
2. The certificate is erroneous. The contractor and unit both cannot be clubbed as one and the same.
3. You are required to re-issue bill to the contractor and should recover the arrears of VAT.
