BACKGROUND
Under the legacy indirect tax regime, taxation of works contracts presented significant challenges due to the limited powers of taxation available to the States and the Centre. Essentially States could tax only sale of goods whereas the Centre could invoke the residuary power to tax services. Therefore, attempts were made to vivisect such composite works contracts into materials and services. Whether a composite works contract can be vivisected in such a fashion and based on such vivisection, whether the respective jurisdictions could impose the taxes and what would be the fetters for such taxation? We have seen a fair share of constitutional amendments, legislative amendments and judicial pronouncements trying to settle and unsettle the answers to these controversies.
Before the controversies on the front of taxability of composite works contracts could really settle, agreements for sale of an under-construction unit by a developer became the next bone of contention on the interpretation that such agreements essentially represent work contracts. The complications increased in this situation since such agreements would involve three elements – one representing the value of the land or undivided interest therein being transferred, one representing the value of the materials being transferred and one representing the services being rendered.
Under the GST regime, the bifurcation of value betwe
