(7)             Notwithstanding anything contained in sub-section (1), —

(a) any authorised retail or wholesale distributor dealing exclusively in rationed articles namely, rice, wheat and kerosene under the Kerala Rationing Order, 1966 shall not be liable to pay tax on the turnover of such goods;

(b) sale of any industrial inputs, plant and machinery including components, spares, tools and consumables in relation thereto to any industrial unit situated in any Special Economic Zone in the State for use in the manufacture of other goods shall, subject to such conditions or restrictions, as may be prescribed, be exempt from tax.

Explanation:  For the purpose of this sub-section, Special Economic Zone shall mean a Special Economic Zone approved and notified as such by the Central Government and includes an existing Special Economic Zone.

(8)  The Rules of Interpretation of the Schedules of this Act shall be as set out in the Appendix.

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7. Trade discount etc. deemed to be sale in certain cases: - Notwithstanding anything contained in any other provisions of this Act, where a dealer4 allows any trade discount or in terms of quantity in goods in relation to any sale effected by him, the quantity so allowed as trade discount or incentive, shall be deemed to be a he dealer, who allows such trade discount or incentive and a purchase by the dealer who r receives such trade discount or incentive and such sale shall form part of the sale in relation to which such trade discount or incentive is allowed.

8. Payment of tax at compounded rates: - Notwithstanding anything contained in section 6-

 (a) (i) any works contractor not being a dealer registered under the provisions of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), or a dealer effecting first taxable sale in the State may, at his option, instead of paying tax in accordance with the provisions of the said section, but subject  to payment of tax if any, payable under sub-section (2) thereof, pay tax at two per cent of the whole contract amount

     (ii) any works contractor, other than those undertaking electrical, refrigeration or air conditioning contracts or  contracts relating to supply and installation of plant, machinery, rolling shutters, cranes, hoists, elevators(lifts), escalators, generators, generating sets, transformers, weighing machines,  air conditioners and air coolers, deep freezers , laying of  all kinds of tiles (except brick tiles) , slabs and stones (including Marble) ,   and not falling under clause (i) above, may, at his option,  instead of paying tax in accordance with the provisions of the said sections, pay tax at four per cent of the whole contract amount.

Provided that the provisions of this clause shall not apply to any works contract in which the transfer of material is in the form of goods.

Explanation I: “First taxable sale” for the purpose of this section shall have the same meaning as assigned to the term by the explanation under
sub-section (5) of section 6.

Explanation II: For the purpose of this clause “whole contract amount” shall not include that portion of a contract which represents amount paid to
sub-contractors for execution of works contract provided that the sub-contractor is a registered dealer liable to tax under sub-section (1) or sub-section (1A) of section 6, and the contractor claiming deduction in respect of such amount furnishes certificates in such form as may be prescribed.

Explanation III: A composite contract for the construction of building shall not be treated as a contract of the nature specified under clause (ii) above which are made ineligible for payment of compounded tax under the said clause merely for the reason that the contract also involves work of the said categories.

(iii) any contractor who had opted for payment of tax in accordance with the provisions of sub-section (7) or sub-section (7A) of section 7 of the Kerala General Sales Tax Act, 1963 (15 of 1963) in respect of any works contract prior to the date of coming into force of this Act, part of which remains to be executed on such date, such contractor may continue to pay tax in respect of the transfer of goods involved in the unexecuted portion of such contracts, at the rate specified in sub-section (7) or sub-section (7A) of said Act.

 (b) Any dealer producing granite metals with the aid of mechanized crushing machine may, at his option, instead of paying tax in accordance with the provisions of the said sections, pay tax at the following rates, namely:-

(i)  for each crushing machine of size not exceeding 30.48 cm x  22.86 cm = Rs.30,000 per annum   

(ii)  for each crushing machine of size exceeding 30.48 cm x 22.86 cm but not exceeding 40.64 cm x 22.86 cm = Rs.90,000 per annum

(iii) for each crushing machine of size exceeding 40.64 cm x 22.86 cm = Rs.1,80,000  per annum

Explanation: - For the purposes of this clause, primary crusher shall also be reckoned for the purpose of computation of the quantum of compounded tax and the rate applicable for primary crusher shall be fifty percent of the rates mentioned in items (i), (ii) and (iii) above.

(c) (i) Any dealer in cooked food and beverages, including  beverages prepared by him, other than a dealer supplying cooked food or beverages to any airline service company or institution or shipping company for serving in air craft, ships or steamer or served in air craft, ship, steamer, bar attached hotel or star hotel may, at his option, instead of paying tax in accordance with the provisions of sub-section (1) of section 6 but subject  to payment of tax, if any, payable under sub-section (2) thereof, pay tax at half per cent of the turnover of cooked food and beverages prepared by him.

(ii) Any bar attached hotel, not being a star hotel of and above three star or a club or a heritage hotel may, at its option, instead of paying tax in accordance with the provisions of section 6, but subject  to such conditions and restrictions as may be prescribed, pay tax at 12.5% of the turnover of cooked food and beverages prepared by it, calculated at 15% of the turnover of foreign liquor estimated  under section 7 of the Kerala General Sales Tax Act, 1963(15 of 1963).

Explanation – For the purposes of this clause “bar attached hotel” shall mean a hotel or restaurant or club or any other place, which is licensed under the Foreign Liquor Rules to serve foreign liquor falling under Sl.No. 2 of the Fourth Schedule but shall not include any hotel or restaurant, not being a star hotel, which is licensed to serve only beer.

(d) Any dealer who transfers the right to use Video Cassette or Compact Disc may, instead of paying tax in accordance with the provisions of section 6, pay tax at the rate of one thousand rupees per year for every main or branch shop situated in any place within the limits of any Municipal Corporation or Municipality and rupees five hundred per year for any main or branch shop situated in any other place or places.

(e) Any dealer, who is an importer or a manufacturer who is not entitled to any deferment of tax under section 32, of medicines and drugs falling under the Third schedule may, at his option, pay, in such manner and subject to such conditions and restrictions as may be prescribed, in lieu of the tax payable by him on such goods under sub-section (1) of section 6, tax at the rate of 4 per cent of the maximum retail price of such goods.

Explanation:  For the purpose of this clause, maximum retail price in respect of the goods mentioned means the maximum price printed on the package of any goods at which such goods may be sold to the ultimate consumer:

Provided that where a registered dealer has purchased any goods, —

(a) from an importer or a manufacturer who has opted for payment of tax under this clause; or

(b) from another registered dealer where the   tax on the maximum retail price of such goods was paid in the state on an earlier sale, such dealer shall, notwithstanding anything contained elsewhere in the Act, but subject to such conditions and restrictions as may be prescribed, be exempt from payment of tax under sub­-section (1) of section 6 in respect of the sale of such goods and be entitled to recover from the buyers the amount of tax paid by him at the time of purchase of such goods and the turnover of such goods shall not be included in the total turnover for the purpose of sub-section (5) of section 6 where the dealer opts for payment of tax in accordance with the said sub-section in respect of goods other than medicines and drugs

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9.  Burden of proof. -  The burden of proving that any transaction of a dealer is not liable to tax under this Act shall lie on such dealer.

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10. Deduction of tax at source. - (1) Every awarder shall deduct from every payment, including advance payment, made by him to any works contractor liable to pay tax under section 6, in relation to any works contract awarded, the tax payable by the contractor in respect of such contract under that section, whether the transfer of goods involved in the execution of works contract is in the form of goods or not, and remit it to Government, in the prescribed manner, on or before the fifth day of the month succeeding the month in which such deduction is made.  Every such awarder shall also file such return as may be prescribed.

Provided that in respect of works contract executed under the Sampurna Gramin rozgar Yojana or the Beneficiary Committees using the Member of Parliament/Member of Legislative Assembly Funds or Natural Calamity Relief Funds of Sarva Siksha Abhiyan Funds, where the total amount in respect of individual contract does not exceed ten lakh rupees, the maximum amount deductable under this section shall not exceed four per cent of the whole contract amount.

(2) For the purposes of sub-section (1) the awarder shall obtain from the contractor a declaration in the prescribed form, showing his tax liability in relation to such works contract:

Provided that the awarder shall obtain from the contractor quarterly certificate issued by the assessing authority showing the tax liability or tax remittances, as the case may be, of the contractor in relation to the contract up to the end of the previous quarter.

Provided further that the awarder shall, before making final payment to the works contractor in respect of any contract, obtain a liability certificate from the assessing authority.

(3) If any awarder effects any payment without deduction of the tax as provided under sub-section (1) or after making such deductions, fails to remit the same to Government within the time limit specified under the said sub-section, the awarder and any person or persons responsible for such deduction on behalf of the awarder, including a Director, Manager, Secretary or other officer of a company, shall be jointly and severally liable for payment of such amounts to the Government forthwith as if it were a tax due from him.

Explanation. -  For the purposes of this section:

(1)       “Company’” means any body corporate and includes a firm or other association of individuals, or a Co-operative society; and

(2)       “Director” in relation to a firm, means partner in the firm.           

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11. Input Tax Credit: - (1) Subject to other provisions of this section, any registered dealer other than those paying presumptive tax under sub-section (5) of Section 6 or those paying compounded tax under section 8, who make purchases from a registered dealer, of taxable goods within the State for resale or for use by him in the manufacture of taxable goods other than those coming under Fourth Schedule, for sale or for use in the execution of works contract or for use as containers or as packing materials for the packing of taxable goods in the State for sale, shall be eligible for input tax credit.

(2) In respect of capital goods purchased by a dealer, input tax credit shall be allowed over a period of three years from the date of commencement of commercial production or from the date from which the capital goods are put to use, whichever is later, in such manner and subject to such conditions as may be prescribed.

(3) Subject to the provisions of sub- section (4) to (13), input tax credit shall be allowed to a registered dealer in respect of a return period against the output tax payable by him for such period and the dealer shall pay to Government, the balance of the output tax in excess of the input tax credited in the manner prescribed.

Provided that no input tax credit shall be allowed to any amount illegally collected by way of tax as specified in sub-Section (3) (a) of Section 30 of the Act.

Provided also that where any goods purchased in the state are subsequently sold at subsidized price, the in-put tax allowable under the sub-section in respect of such goods shall not exceed the out put tax payable on such goods

(4) Unregistered dealers or dealers paying presumptive tax under sub-section (5) of section 6 or dealers paying compounded tax under section 8 or dealers who transfer the right to use goods under clause (c) of sub-section (1) of section 6 shall not be eligible for input tax credit.

(5) No input tax credit shall be allowed for the purchases, -

(a)   from an unregistered dealer or from a dealer not liable to tax under section 6 or from a dealer whose registration has been cancelled;

(b) from a dealer paying presumptive tax under sub-section (5) of section 6;

(c) from a dealer paying compounded tax under Section 8.

(d)      of goods from outside the State in the course of inter State trade or commerce or otherwise in respect of tax paid on such purchase;

(e)       of goods which are used in the manufacture, processing or packing of goods specified in the First Schedule and the Fourth Schedule;

(f) of goods specified in the Fourth Schedule;

(g) of goods, which are used, as fuel in motor vehicles or vessels or stores;

(h) of motor vehicles where such motor vehicle is sold as a used motor vehicle except where such motor vehicle is purchased as a used motor vehicle.

Explanation:  For the purpose of clause (g) “stores” shall not include spare parts or tools in relation to any goods to which the provisions of this section applies

(i) (Omitted)

 (j) which relates to goods sold by a principal through his agent in respect of which the principal has claimed input tax credit or vice versa;

(k) of goods remaining unsold at the time of closure of business;

(l) of goods which are used in the manufacture, processing or packing of goods, where such manufactured, processed or packed goods remain unsold at the time of closure of business; 

(m)  of goods where tax invoice in the prescribed form is not available with the dealer or there is evidence that the same has not been issued by the selling dealer;

(n) by a dealer who is exempted from payment of  tax;

(o)  ( Omitted )

(6) If the input tax of a dealer for a return period is more than the out put tax of that return period, the difference between the input tax and the out put tax shall be first adjusted against any interest, tax or any other amount due or demanded under this Act, from the dealer for any previous return period(s) and then to the tax payable by the dealer on the sales in the course of inter-state trade and the balance, if any, shall be carried forward to the next return period for the purpose of allowing input tax credit in the succeeding return period.

Provided that where the excess input tax so carried forward cannot be fully adjusted during the last return period of that year, the excess input tax credit so remaining unadjusted shall be refunded to the dealer as if it were a refund accrued under section 13.

(7) If goods are purchased in the course of business during any return period for any purpose mentioned in sub-section (1) and are subsequently used, fully or partly, for purposes other than those specified in the said sub-section, or has remained as unsold at the time of closure of business in relation to such goods, the input tax on such goods used otherwise or goods remained as unsold at the time of closure shall be the reverse tax for that return period which may be determined in the manner prescribed.

(8) The reverse tax as determined under sub-section (7), shall be deemed to be an amount due under this Act.

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(9) Any dealer who claims input tax credit under this section in respect of any purchase shall keep the original tax invoice for such purchase (duly filled in and signed and issued by the selling dealer) wherein the input tax has been separately charged, and produce for verification as and when required by any authority empowered under this Act.

(10) Notwithstanding anything contained in any other provisions of this Act, a dealer who purchases goods from another dealer whose Certificate of Registration is suspended, shall not be eligible for input tax credit on such purchases of goods, made during the period of suspension of the Certificate of Registration.

(11) Notwithstanding anything contained in any other provisions of this Act, a dealer whose Certificate of Registration is suspended shall not be entitled to claim any input tax credit during the period of suspension of the Certificate of Registration.

(12) A registered dealer who intends to claim input tax credit under this section shall, for the purpose of determining the amount of input tax credit, maintain the accounts and such other records as may be prescribed, in respect of purchases, supplies and sales effected by him in the State.

(13). Subject to the provisions of sub-sections (4) to (7) and sub-sections (10) to (12), input tax credit shall be allowed to a registered dealer in respect of the tax paid under the Kerala General Sales Tax Act, 1963 (15 of 1963) where the tax paid by the dealer who sold the goods to such registered dealer or by any pervious seller, or the Kerala Tax on Entry of Goods into Local Areas Act, 1994 (15 of 1994), in respect of goods purchased by him during a period of one year immediately preceding the date of commencement of this Act, subject to such conditions and restrictions as may be prescribed, where such goods are—

(i) held as opening stock on such date and sold or used in the manufacture of taxable goods or used in the execution of works contract or used as containers or packing materials for the packing of taxable goods in the state for sale thereafter; or

(ii) used in the manufacture of taxable goods or as packing materials for the packing of taxable goods and such manufactured or packed goods are held as opening stock on such date; or

(iii) used in the manufacture of taxable goods and are held as opening stock on such date as work in process.

             Provided that the assessing authority may adjust any amount accruing to a dealer as input tax credit under this sub-section towards any tax or other amount due from the dealer, under this Act or under the provisions of the Kerala General Sales Tax Act, 1963 (15 of 1963) or the Central Sales Tax Act, 1956 (Central Act 74 of 1956) or The Kerala Tax on Entry of Goods into Local Areas Act, 1994 (15 of 1994).

            Provided further that where it is found on audit that the dealer claiming input tax credit under this sub-section has charged tax under section 6 on the turnover of such goods without making any deduction in respect of the tax paid under the Kerala General Sales Tax Act, 1963 (15 of 1963) for which input tax credit is allowed to him under this sub-section, the input tax credit availed of by him shall be liable to be disallowed to that extent and the input tax credit so disallowed shall be deemed to be reverse tax due under sub-section (7).

 Explanation: - For the purposes of this sub-section “input tax” means tax paid by one registered dealer under the Kerala General Sales Tax Act, 1963 (15 of 1963) to another such dealer or, where the goods are liable to tax under the Kerala General Sales Tax Act, 1963 (15 of 1963) at the point of first purchase or last purchase or under section 5A, as the case may be, the tax paid by the dealer claiming input tax credit under this sub-section on the purchase or tax paid by such dealer under the Kerala Tax on Entry of Goods into Local Areas Act, 1994 ( 15 of 1994).

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12. Special rebating in certain cases: - (1) In calculating the net tax payable by a dealer for a return period there shall be deducted from the tax payable for the return period, a sum equal to –

(a)                the tax paid under sub-section (2) of section 6; and

(b)               the tax paid under section 3 of the Tax on Entry of

 Goods into Local Areas Act, 1994 (15 of 1994) on the import of any goods, other than those included in the fourth schedule; where such goods are intended for re-sale or for use in the manufacture of taxable goods or for use in the execution of works contract or for use as containers or packing materials for the packing of taxable goods in the state:

Provided that where the special rebate is in respect of capital goods, the same shall be allowed over a period of three years and all the conditions and restrictions applicable to input tax credit under sub-section (2) of section 11 shall apply to the special rebate under this section also:

Provided also that where the goods in respect of which tax is payable under sub-section (2) of Section 6 is sold in the State or in the course of inter-state trade or used in the manufacture of taxable goods in the month in which it is purchased, the special rebate allowable in respect of such goods resold or sold in the course of inter-state trade or used in the manufacture of taxable goods shall be deducted from the tax payable under sub-section (1) of section 6 or under the provisions of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), where the liability under sub-section (2) of Section 6 has been created in respect of such  purchase.

 (2) Unregistered dealers or dealer paying presumptive tax under sub-section (5) of section 6 or dealer paying compounded tax under section 8 shall not be eligible for rebate under sub-section (1).

(3) If the rebate allowed under sub-section (1) and the input tax credit allowed under section 11 is more than the output tax for that return period, the amount by which the sum of the input tax credit and rebate under sub-section (1) is in excess of the output tax for the return period shall be in the same manner as input tax under sub-section (6) of section 11, as if such rebate were also input tax credit accrued under that section.

(4) Where rebate is claimed under sub-section (1) in respect of any goods during a return period and the goods are subsequently used, fully or partly for purposes other than those specified in the said sub-section, or has remained as unsold at the time of closure of business, in relation to such goods, the rebate claimed on such goods used otherwise or remained as unsold at the time of closure shall be the reverse tax for that return period which may be determined in the same manner as if it were a reverse tax accrued under sub-section (7) of section 11.

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13. Refund of input tax in the case of export or interstate sale: -

    (1) Every sale in the course of export shall be a zero rate sale.

(2)   Where input tax has been paid in respect of the purchase of any goods including capital goods, except those goods coming under the Fourth Schedule, and such goods are either,-

 (i)     sold in the course of export; or

(ii)     sold in the course of inter-State trade or commerce; or

(iii)   sent to outside the State otherwise than by way of sale in the course of inter- State trade; or

(iv)   (a) used or consumed in the manufacture of goods, other than those falling under the Fourth Schedule, or used as containers or as packing materials for such goods and such manufactured goods are sold in the course of export; or

 (b) used or consumed in the manufacture of taxable goods or used as containers or as packing materials of such goods manufactured and such manufactured goods are sent outside the State either by way of sale in the course of inter-state trade or commerce or otherwise; or

(v) used as Capital goods; the input tax paid on such goods

shall be refunded to the person making such sales in the course of export or in the course of inter-State trade or commerce or sending such goods to outside the State, as the case may be, in such manner and subject to such conditions as may be prescribed:

Provided that the dealer claiming such refund shall not claim input tax credit on such purchases for any return period:

Provided further that where the goods are sent to outside the State otherwise than by way of sale in the course of inter-State trade or export or where the sale in the course of interstate trade is exempted from tax, the refund under this section shall be limited to the amount of input tax paid in excess of the rate specified under sub-section (1) of section 8 of the Central Sales Tax Act 1956 (Central Act 74 of 1956) on the purchase turnover of such goods sent outside the State, re-sold or used in the manufacture, as the case may be:

Provided also that in the case of capital goods, the refund of input tax will be allowed in such instalments as may be prescribed.

(3) Nothing contained in sub-section (2) shall be construed as preventing the assessing authority from adjusting any amount due as refund under sub-section (1) towards any tax or other amount due from the dealer, under this Act or under the provisions of the Kerala General Sales Tax Act, 1963 (15 of 1963) or the Central Sales Tax Act, 1956 (Central Act 74 of 1956) or The Kerala Tax on Entry of Goods into Local Areas Act, 1994 (15 of 1994).

 4) The provisions of this section shall apply to goods purchased by a dealer during a period of one year immediately preceding the date of commencement of the Act and held by such dealers as opening stock on such date.

Explanation:   For the purpose of this section—

(a) sale in the course of export means a sale falling under sub-section (1) or sub- section (3) of section 5 of the Central Sales Tax Act 1956 (Central Act 74 of 1956).

(b) input tax” includes tax paid under sub-section (2) of section 6, input tax covered by the Explanation to sub-section(13) of section 11 and the tax paid under the Tax on Entry of Goods into Local Areas Act, 1994 (15 of 1994) on any taxable goods.

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14. Reimbursement of tax: --Where tax has been collected by any dealer in the State on any sale effected under this Act to any official or personnel of, –

(a) any foreign diplomatic mission or consulate in India ; or

(b) the United Nations or any other similar international body, entitled to privileges under any convention to which India is a party or under any law for the time being in force; or

(c) any consular or diplomatic agent of any mission, the United Nations or other body the tax so collected shall  be reimbursed to such person, mission, United Nations or  other body in such manner as may be prescribed.

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CHAPTER - IV

REGISTRATION AND PERMIT

15. Registration of dealers. -  (1) Every dealer whose total turnover in any year is not less than five lakh rupees shall, and any other dealer may, get himself registered under this Act.

(2) Notwithstanding anything contained in sub-section (1)

(i)   every casual trader;

(ii)    every dealer, registered under the Kerala General Sales Tax Act, 1963 (15 of 1963) immediately before the date of commencement of this Act, whose total turnover under the said Act for the year preceding such date was not less than the limit specified under sub-section (1)

(iii)   every dealer registered under sub-section (3) of section 7 of the Central   Sales Tax Act, 1956 (Central Act 74 of 1956);

(iv)   every dealer who in the course of his business obtains or brings goods from outside the State or effect export of goods out of the territory of India;

(v)    every dealer in bullion or specie or in jewellery of gold, silver or platinum group of metals,

(vi)   every dealer residing outside the State, but carrying on business in the State,

(vii)  every agent of a non-resident dealer

(viii) every commission agent, broker, delcredere agent, auctioneer or any other mercantile agent, by whatever name called, who carries on the business of buying, selling, supplying or distributing goods on behalf of any principal;

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