No. C1-53164/94/TX.                                          Office of the Board of Revenue (Taxes),

                                                                               Thiruvananthapuram, Dt. 02..01..1995.

CIRCULAR No. 1/95

Sub:   Works Contract – permission to opt compounding under section 7 (7A) of KGST Act 1963 – Reg.

…..

Attention of all Officers is invited to the Kerala Finance Act, 1994, by which the proviso to sub-section (7A) of Section 7 of the K.G.S.T Act, 1963 has been substituted by a new proviso whereby the facility for compounding tax at 5% is extended retrospectively from 01..04..1984 to all contractors, other than civil contracts, if the amount of each contract does not exceed Rs. 50 lakhs. Now an instance has been brought to the notice of the Board wherein a contractor who opted to pay tax in accordance with the newly introduced proviso to sub-section (7A) of Section 7 of the K.G.S.T Act, 1963, has been denied the facility by the assessing authority on the ground that the contractor is not entitled to exercise the option since an option to pay tax as per sub-section (7A) was already made for previous periods. The Act as it stands amended at  present does not impose any such restriction. There is no legal impediment in permitting a dealer who has been opting to pay tax Under Section 7 (7A) of the Act till 93-94 to switch over to compounding under the proviso to Section 7 (7A), as each year’s assessment is independent and the dealer can opt or not opt for compounding for each contract. Therefore, all officers are directed to bear in mind the above legal position and to act accordingly.

The Deputy Commissioners shall obtain acknowledgements from the subordinate officers.

Sd/-

Secretary (Taxes) – II

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