The Haryana Excise and Taxation Department has issued a Removal of Difficulties Order clarifying that for determining taxable turnover of sale, the cost of material and other labour/ services and like charges incurred in the execution of works contract before entering into an agreement with the intended purchaser shall also be reduced besides the already provided deductions from the total value of the agreement. This Order shall come into force
with effect from the 17th May 2010
The clause (i) of sub-rule (7) of rule 25 of the Haryana Value Added Tax Rules, 2003 provides that “Where an agreement is executed by the developer with the intended purchaser after commencement but before completion of construction, the taxable turnover of sale shall be the total value of the agreement, as reduced by cost of land and pro-rata amount of labour, services and like charges, determined in accordance with this rule.”
admittedly, clause (i) of sub-rule (7) of rule 25 of the Haryana Value Added Tax Rules, 2003 is not in conformity with the law laid down by the Hon’ble Supreme Court of India in the case of M/s Larson and Tubro Limited Vs. The state of Karnataka and others decided on the 26th September 2013 so far as the value of taxable turnover cannot include the value of goods incorporated in the works contract before the agreement is executed with the intended buyer.
“For the removal of difficulties, it is hereby clarified that as per the clause (i) of sub-rule (7) of rule 25 of the Haryana Value Added Tax Rules, 2003, for determining the taxable turnover of sale, the cost of material and other labour/services and like charges incurred in the execution of works contract before entering into the agreement with the intended purchaser, shall also be reduced besides the already provided deductions from the total value of the agreement,” the state government notified.
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