Compounded tax collection allowed for first-time dealers under KVAT provisions.

JUDGMENT

Dated this the 19 ^th day of November, 2025 The issue involved in this writ petition is with respect to the compounding tax under Section 8(f)(i) of the Kerala Value Added Tax, 2003 (KVAT Act).

2. The petitioner is a dealer in Jewellery bearing TIN No.32010186328 under the KVAT Act. It is the case of the petitioner that Section 8(f) of the KVAT Act provides for payment of compounded tax for a particular year, in which the option is exercised based on the tax paid or payable for the previous year. The percentage of such compounded tax to be paid for the year in which the option is exercised differs depending on the tax paid and the turnover of the previous year or years as the case may be. However, it is further asserted that, under the proviso to Section 8(f)(i)(d) (the un-amended provisions) and as per Section 8(f)(iii) of the KVAT Act, a dealer is permitted to collect tax at 1.25% as per the rates under Table to Section 8(f)(iii). Accordingly, the petitioner collected an amount of Rs.1,03,80,955/- during the financial year 2014-

15. In compliance of Section 8(f), the petitioner remitted Rs.1,04,25,528/- to the State Exchequer. However, Ext.P1 order issued under Section 25(1) of the KVAT Act declined to accept the same, holding that it is not legally permitted under the amended provisions of sub clause (3) of Section 8(f) of KVAT Act for the year 2014-15, as the petitioner had not opted for compounded payment of tax for the first time for the year

2014-15.

3. This issue is already considered by this Court in WP(C) No.3494 of 2017. The relevant paragraph of the judgment reads thus:

5. It is also to be noticed that Section 8(f) was amended by substituting with a new clause in the Finance Act, 2014, giving retrospective effect from 01.04.2013. Sub-clause (iii) of Section 8(f) makes it clear that “the dealer who opts payment of tax under this clause, may collect tax of the deal as shown in the table. However, the table clearly illustrates that the compounded tax payable for the current year is presented in percentages based on the tax paid or payable from previous years, indicating that it applies to all compounded dealers, regardless of their compounding status. The phrasing “compounded tax payable for the year under option” pertains to the current year and encompasses percentages specified in both sub clauses related to past tax payments. If the provision were solely applicable to those previously compounding, the table would not include first-time compounding rates. Thus, dealers opting for compounding under section 8(f) are granted the authority to collect tax at the stated rates, irrespective of whether they are first-time or continuing compounded dealers. Consequently, the restriction against tax collection specifically applies to compounded dealers under sections 8(a), 8(c), and 8(d) of the Kerala Value Added Tax Act 2003, with no such restriction for those under section 8(f). This being so, and in the absence of any provision indicating that the collection of tax, as narrated above, is permitted only to the dealers who have compounded during the previous years alone and not permissible to dealers who are compounding for the first time, the contention of the respondents cannot be accepted.”

4. Going by the dictum laid down by this Court in the above said judgment, it appears that the facts involved in this case is similar to that of the case referred above.

Under such circumstances, the writ petition is allowed.

Ext.P1 shall stand set aside to the extent it does not affect the tax dues at 14.5% on Rs.73,905/-, i.e., Rs.10716.30/-