A Circular has been issued for Composition Dealers (including Works Contractor) to clarify that Composition Dealers are not allowed to effect inter state purchases / procurements and that e-sugam of the dealers would be verified to give effect to this circular and that the registration of dealers under composition scheme, who have effected such purchases, would be cancelled with immediate effect.
However, for works contractor, to the extent they have paid full rate of tax in respect of such inter state purchases / procurements, this circular will not apply. But, purchase of capital goods or goods which are not sold in the course of works contract would attract this circular. We believe that to the extent it relates to Works Contractors, this Circular is bad in law because it goes beyond the statutory provisions which allow interstate purchases by works contract dealers under composition scheme
However, for works contractor, to the extent they have paid full rate of tax in respect of such inter state purchases / procurements, this circular will not apply. But, purchase of capital goods or goods which are not sold in the course of works contract would attract this circular. We believe that to the extent it relates to Works Contractors, this Circular is bad in law because it goes beyond the statutory provisions which allow interstate purchases by works contract dealers under composition scheme
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