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Business, Manufacture And Works Contract In Sales Tax India
- What Is Business?
- What Is Place Of Business?
- What Is A Works Contract?
- What Is Turnover?
- What Is Meant By Manufacture?
What Is Business?
Section 2(aa) states that a business includes the following:-
- Any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and, whether or not any gain or profit accrues from such trade, commerce, manufacture, adventure or concern.
- Any transaction in connection with or incidental or ancillary to such trade, commerce, manufacture, adventure or concern.
What Is Place Of Business?
A place of business includes the following:-
- In any case, where a dealer carries on business through an agent by (whatever name called) the place of business of such agent.
- A warehouse, godown or other place where a dealer stores his goods.
- A place where a dealer keeps his books of accounts.
A dealer may have one or more places of business in more than one State or city. In such case, he will have to get himself registered under the sales tax authority of each state.
Thus, the place of business is the place where the business is actually carried out as well as where an agent carries on the business, where the goods are stored (e.g. godown or warehouse) and the place where the books of accounts of the business are stored.
What Is A Works Contract?
A works contract is an agreement, which is entered into for the following purposes:
- For carrying out construction, fitting out, improvement or repair of any building, road, bridge or other immovable or movable property.
- For cash, or for deferred payment, or for other valuable consideration.
In other words, whenever there is a contract, by which one person promises to make something which, when made, will not be his absolute property, and by which, the other person promises to pay for the work done, will be considered to be a contract for work. This will be the case even if the payment maybe called a price for the thing and if the materials, of which the thing is made, may be supplied by the maker.
Though the Central Sales Tax Act still has no definition for a contract or works contract, the definition of sale includes a transfer of property in goods, involved in the execution of a works contract.
In order to prevent evasion of tax by the transfer of property through a works contract, the Indian Constitution was amended to make such transactions taxable. Works contracts are taxable under most State sales tax laws (but not under the Central Sales Tax Act). However, it is only taxable to the extent of the value of the goods that have been transferred. This means that the full value of the Works Contract is not taken into account while calculating tax that is payable under the state sales tax laws.
What Is Turnover?
Turnover is defined under S 2(j) to mean the aggregate of the sale prices in respect of sales of any goods in the course of inter-State trade or commerce, made during any prescribed period. This is determined in accordance with the provisions and rules of the Act.
What Is Meant By Manufacture?
Manufacture refers to the conversion of goods into a new form, whereby an altogether different article emerges. The conversion of raw material to finished goods is termed as manufacture.
A checklist of goods, which may be used in manufacture, is given below:-
- Raw material.
- Fuels and consumables.
- Machines, spare tools etc.
- Storage and handling equipment for materials.
- Goods required for research and development.
- Computer internal telephone system used for production purposes.
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