Composition scheme benefit cannot be denied on post-sale construction by dealers who are engaged in both construction & sale

CA Bimal Jain

Omega Shelters (P.) Ltd. Vs. Assistant Commissioner (CT)(LTU), Hyderabad [(2015) 62 taxmann.com 117 (Andhra Pradesh and Telangana)]

Omega Shelters (P.) Ltd. and others (the Petitioners), engaged in construction and sale of residential apartments executes conveyance deed of semi-finished apartments and completes remaining construction afterwards. The Petitioners opted to pay tax by way of composition under Section 4(7)(d) of the Andhra Pradesh VAT Act and have been paying VAT at 4%, 5% or 25% of the total consideration, on these components of the agreements, at the time of registration of the flats or soon thereafter.

The Assessing officer denied the benefit of the Composition scheme on construction completed after execution of a registered sale deed.

The Hon’ble High Court of Andhra Pradesh held that if dealers engaged in the construction and sale of residential apartments, houses, buildings or commercial complexes, exercise an option, and comply with the conditions stipulated in Section 4(7)(d) of the Andhra Pradesh VAT Act and Rule made thereunder, they cannot be denied the benefit of composition scheme for the construction made by them, for the very same person, after execution of a registered deed for the sale of a semi- finished structure because the Petitioners were engaged in both construction and sale. Further, composition scheme is not dependent upon the stage of construction when conveyance deed is executed, thus, entire construction would fall within the ambit of composition scheme.