|
|
|
|
|
Sales Tax Review |
|
March
2008 |
|
Roving Eye |
-
State Finance Minister’s Budget Speech is lukewarm
Reading of Part-II of the Budget Speech delivered on
19-3-2008 by Shri Jayant Patil, Hon’ble Finance Minister, gives a lukewarm
impression as far as tax issues are concerned. Particularly, Paragraph 3 of
the Budget Speech which talks of asserting ‘The administration of sales tax’
is now well stabilized is miles away from the real issues addressed by the
Associations of Trade & Industry and of Tax Practitioners. The statement –
"These representations are immediately acted upon" is far from truth. At the
opening of the Paragraph, in the first breath, the Hon’ble Minister says that
the VAT system is now well established and, in the second breath, he says that
the project of computerization of the Dept. will be completed during the
course of this year; i.e., in the forth year. After stating this position, he
recognizes that thereafter only the efficiency of the Dept. will increase. In
this connection, our honest opinion is that the Hon’ble Finance Minister has
not appreciated the correct pulse of the Sales Tax Dept. which is really
dormant over these years. Only one example will prove that the Dept. does not
know where the returns filed by the traders go. One important legal issue of
legislation; i.e., of sorting out the problem pertaining to filing of an
appeal against the revision order is still pending in Mantralaya. Moreover, a
just and proper suggestion of providing an appeal against the DDQ Order of the
Commissioner in the matter of Luxuries Tax Act, is not acted upon. So, least
said is better !
-
Customized Software vis-ŕ-vis Union Budget – 2008
The Budget has inserted a new sub-clause (zzzze) in Section
65(105) of the Finance Act, in order to levy service tax on development of
information technology software, thus bringing customized software on par with
packaged software. Here it may be noted that package software is chargeable to
excise duty @ 12%.
-
The newly introduced definition is with
regard to information technology software services. These have been
exhaustively defined to inter alia include all activities in relation
to conceptualizing, planning, designing, advice, consultancy, development
and implementation of software.
-
However, the extension of service tax to
customized software opens up interesting issues with regard to the Value
Added Tax (VAT). Certain States have classified software development as
either ‘goods’ or as ‘works contract’ under local VAT legislations. The
States were happy by the decision of the Larger Bench of the Apex Court in
the case of Tata Consultancy Services vs. State of A.P. (2004) 137 STC
620 (SC) wherein, it held in the context of the definition of "goods"
u/s 2(n) of the APGST Act, that a transaction of sale of computer
software-package off the shelf is clearly a sale of "goods" within the
meaning of definition u/s 2(n).
However, in
the said case, the Supreme Court did not decide the question whether custom
made software would be ‘goods’ or not.
Now, with the
classification of the software development as a service, under the Service
Tax law, a new meaning has been assigned to the activity of software
development. This has thus led to confusion as to which tax ought to apply
on software development; i.e., the goods tax – VAT – or the service tax. In
this context, the understanding so far has been that, in law, developer of
customized software can only be required to pay either VAT or service tax,
not both, as per the decision of the Larger Bench of the Apex Court in the
case of BSNL vs. UOI (2006) 145 STC
91 (SC).
Thus, by introducing service tax on software
development, the Central Govt. has opened up new area of litigation. Both
the Governments desire to tax the same transaction as sale of goods as well
as of service. So, let us watch keenly further developments in the field
whether the issues will be tested at the Apex Court level or suitable
amendments are made to both the service tax and VAT Act of the States, to
sort out the tangle so created.
-
Job Scheme Funds scrapped, State diverts Rs. 10K crore
The above heading is from TOI report dated 17-3-2008. As
per the report a whopping Rs. 10,661 crore reserved for the Employment
Guarantee Scheme (EGS) has been diverted into the consolidated budget of the
State after the controversial bill to scrap the EGS funds was passed amide a
din in the State Legislative Assembly on 16-3-2008.
-
Senior bureaucrat in the Finance Department,
Santosh Kumar inked the one-page order to divert the unspent EGS funds,
minutes after the bill to dissolve the reserve money was hastily passed in
the lower house of the State Legislature. The funds will help inflate the
consolidated budget kitty of the State Govt. and enable the DF leaders to
spend it on works on their wishlist.
-
The above action of the Govt. is against its
own policy to spend EGS funds which are exclusively reserved to pay the
jobless rural workers who are given temporary employment for constructing of
roads, minor irrigation dams and water-shed development programmes. It is a
sort of a distress mitigation fund where the State has to shoulder the
responsibility of providing work and food to the rural poor during a crisis.
This clearly shows that the Government is not for the welfare of the rural
people !
|
|
|
