Top Stories Over-the-Counter Sales during COVID Lockdown included in Turnover Calculation for Compounded Tax under Kerala General Sales Tax Act: Kerala HC [Read Order] By Devanand T R – On April 16, 2024 1:20 pm – 2 mins read The High Court of Kerala has upheld the inclusion of over-the-counter sales during the COVID-19 lockdown period in the turnover calculation for compounded tax under the Kerala General Sales Tax Act, 1963. The decision came as the court dismissed an appeal filed by Lukose K.C., the proprietor of M/S KBC Green Park Hotel in Edat, Payyannur, Kannur.

The appeal originated from the appellant’s dissatisfaction with the tax assessment for the years 2022-2023 and 2023-2024. The appellant contested the orders issued by the Deputy Commissioner, Tax Payer Services, Kannur North, under Section 7 of the Kerala General Sales Tax Act. The orders finalised the assessment of the appellant’s tax liability on a compounded basis, a method he had opted for during the relevant years. The appellant’s grievance primarily revolved around the computation of tax at a compounded rate. He argued that the turnover figures, including over-the-counter sales during the COVID-19 lockdown, should not have been considered for the tax assessment.

The appellant, represented by Smt. K. Krishna and Sri R. Sreejith contended that since his hotel was licensed only for operating a bar-attached hotel, the over-the-counter sales, which were not permitted for such establishments, should not be factored into the turnover calculation. They argued that the computation of compounded tax under the Kerala General Sales Tax Act was flawed and should have been rectified by the court.

The respondent revenue, represented by Sri V.K. Shamsudheen argued that the appellant, having chosen compounded tax assessment, cannot contest its application. They emphasised that over-the-counter sales during the COVID lockdown were permissible concessions, thus justifying their inclusion in the turnover calculation for tax assessment. The bench, after considering the submissions made by both parties and examining the facts and circumstances of the case, found no merit in the arguments of the appellant. The bench cited the decision of the High Court in the case of Kalyan Tourists Home v. State of Kerala [(2018) 52 GSTR 161: 2017 (2) KLT 761], to support its ruling.

The bench held that the appellant, having chosen to pay tax on a compounded basis, could not now contest the applicability of the formula provided for such tax payment. Further, the court emphasised that the permission granted to hotel owners to conduct over-the-counter sales during the COVID-19 lockdown was a concession aimed at helping businesses survive during challenging times.

It reasoned that the appellant could not now dispute the inclusion of such sales in the turnover calculation simply because he did not originally possess the authorization for such transactions. In result, the division bench of the Kerala High Court comprising Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. dismissed the appeal, affirming the tax assessment orders issued by the Deputy Commissioner. The judgment provided clarification regarding tax assessments under the Kerala General Sales Tax Act, particularly concerning the treatment of turnover during exceptional circumstances like the COVID-19 pandemic.