compilation of works contract provisions under vat laws o

www.icai.org

ISBN : 978-81-8441-614-5

The Institute of Chartered Accountants of India(Set up by an Act of Parliament)

New DelhiMarch/2013/1,000 (New)

Compilation of

Works Contract Provisions under VAT Laws of Different States

Compilation of Works Contract Provisions under VAT Laws of Different States

http://www.simpletaxindia.net


Compilation of Works Contract

Provisions under VAT Laws of Different States

The Institute of Chartered Accountants of India (Set up by an Act of Parliament)

New Delhi



Compilation of Work Contract Provisions

The Institute of Chartered Accountants of India All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form, or by any means, electronic mechanical, photocopying, recording, or otherwise, without prior permission, in writing, from the publisher. Edition : February, 2013 Committee/Department : Indirect Taxes Committee Email : [email protected] Website : www.icai.org Price : ` 450 /- (Including CD) ISBN : 978-81-8441-614-5 Published by : The Publication Department on behalf of the

Institute of Chartered Accountants of India, ICAI Bhawan, Post Box No. 7100, Indraprastha Marg, New Delhi - 110 002.

Printed by : Sahitya Bhawan Publications, Hospital Road,

Agra 282 003 March/2013/1,000 Copies



Foreword

Laws and rules relating to indirect taxes have been evolving on account of development in business models, economic growth of the country, global developments, and technological advances and also with reforms in the field of taxation especially, in the area of service tax. The introduction of value added tax in the year 2005 marked a significant step forward in the reform of domestic trade taxes in India. Introduction of VAT in the States has been a more challenging exercise in a federal country like India, where each State, in terms of Constitutional provision, is sovereign in levying and collecting State taxes. However, now all the States and Union Territories have implemented State-Level VAT. Though the broad design of the State-level VAT is uniform across the country but every State has its own VAT legislation and procedures differ on many counts from one State to another. It is often found that information in respect of VAT laws of various States is not available readily at one place. I, therefore, congratulate the Indirect Taxes Committee and in particular, CA. Madhukar N Hiregange, Chairman, Indirect Taxes Committee for bringing out a Compilation of Works Contract Provisions under VAT Laws of Different States. Compilation of works contract assumes significance as taxation of works contract has always been a challenging area for the professionals. I am sure that members will find this compilation very useful in their day to day practice in respect of State-Level VAT. Date: 29th January, 2013 Place: New Delhi

CA. Jaydeep Narendra Shah President



Preface

Works contract taxation is considered to involve a lot of complexities and controversies which in the short term may not get resolved. Since the time when the concept of deemed sale was introduced under sales tax, transactions that would be liable to tax under the guise of works contract have always been a matter of debate and dispute.

Earlier the Courts took a view that in the case of composite contracts involving sale of goods and execution of works, no sales tax could be levied at all - the landmark decision on the issue being the Supreme Courts ruling in the case of State of Madras vs. Gannon Dunkerley & Co. (Mad) Ltd. [1958] 9 STC 353 (SC). However, in order to enable the States to collect the sales tax, the 46th amendment to the Constitution provided for the taxation of transfer of materials used in the execution of a works contract as deemed sale. Clause 29A was added to Article 366 of the Constitution of India to cover transfer of property in goods involved in execution of works contract.

Works contract is defined in the Central Sales Tax, 1956 as a contract for carrying out any work which includes assembling, construction, building, altering, manufacturing, processing, fabricating, erection, installation fitting out, improvement, repair or commissioning of any movable or immovable property. Majority of the States have adopted this definition for works contract in their VAT legislations. Though the basic framework of the works contract provisions is broadly the same across the country, the administrative and procedural provisions do vary from State to State depending upon the size and developmental status, the experiences in implementation and monitoring of compliances, the extent of computerization of each State and so on.

Considering the positive feedback of the Committees publication, Compilation of Registration Provisions under VAT Laws of Different States, the Indirect Taxes Committee of the ICAI decided to prepare a similar compilation of the provisions of works contract under the VAT laws of different States to assist the members of ICAI who practice in different States and are called upon by the businesses operating in multi States. This would, in effect, facilitate the members to practice across geographies thereby



vi

enabling even a small town practitioner to render services in any State with the aid of technology.

This Compilation of Provisions of Works Contracts under the VAT Laws of Different States will also be of assistance to those experts/ officers working on Goods and Services Tax to understand the process being followed in different States, adopt best practices and achieve uniformity in provisions across all States to facilitate businesses operating in different states.

Information in respect of provisions of Works Contract of twenty-six States has been collated in this compilation. For quick reference and easy understanding, the provisions have been tabulated against a set of common questions for all the States.

I am thankful to CA. Jaydeep Narender Shah, President, ICAI and CA. Subodh Kumar Agrawal, Vice-President, ICAI who have been supporting the initiatives and the members of Committee in particulars by CA. Sanjay M. Dhariwal, CA. Rajiv J. Luthia and CA. Pulak Saha who provided valuable inputs for this publication. Also, I acknowledge with thanks, contribution made by CA. Gaurav Gupta and CA. Brijesh Verma. I must compliment and appreciate the substantial assistance provided by the Indirect Taxes Committee Secretariat in bringing out this publication.

I look forward to feedback for further improvements in this Compilation at [email protected] and queries on www.pdicai.org.

Date: 29th January, 2013 Place : New Delhi.

CA. Madhukar N. Hiregange Chairman

Indirect Taxes Committee



Introduction

vii

CONTENTS

Introduction 1-6 States

(i) Andhra Pradesh 7-17 (ii) Arunachal Pradesh 18-53 (iii) Assam 54-78 (iv) Bihar 79-108 (v) Chhattisgarh 109-134 (vi) Delhi 135-154 (vii) Goa 155-179 (viii) Gujarat 180-195 (ix) Haryana 196-212 (x) Himachal Pradesh 213-227 (xi) Jharkhand 228-249 (xii) Karnataka 250-276 (xiii) Kerala 277-294 (xiv) Madhya Pradesh 295-318 (xv) Maharashtra 319-355 (xvi) Manipur 356-387 (xvii) Nagaland 388-413 (xviii) Orissa 414-434 (xix) Punjab 435-453 (xx) Puducherry 454-482 (xxi) Rajasthan 483-512 (xxii) Tamil Nadu 513-528 (xxiii) Tripura 529-547 (xxiv) Uttarakhan 548-562 (xxv) Uttar Pradesh 563-576 (xxvi) West Bengal 577-606



viii



INTRODUCTION

The Indian Constitution is considered to be the Mother of all Law, where the powers have been given to enact laws in the matters enumerated in Seventh Schedule between Central and States. It acts as machinery by which laws are made. One of the important characteristic of the Constitution is Division of Power between the Union and the State Governments. Article 246 of the Constitution deals with Distribution of Legislative Powers. The legislative power under the Indian Constitution is subject to the limitation of the rule that a State Legislature cannot legislate extra-territorially, though Parliament does not suffer from this limitation.

According to Article 246, Union has been given exclusive power to make laws in respect of the matters listed in List I [called Union List] of the Seventh Schedule. Simultaneously, States have been given power to make laws in respect of the matters listed in the List II [called State List] of the Seventh Schedule. Further, this article also gives power to Union and States to make laws in respect of matters not included in either Union List or State List but listed in List III [called Concurrent List]. The power given to the States in respect of matters listed in Concurrent List is subject to limitation of Article 254. It means that in the event of any inconsistency between the laws made by Parliament and laws made by the State Legislature, the former will prevail. Overall it is important to note that there is no implied restriction on the States while exercising powers under legislative heads unless expressly provided in the Constitution itself. The works contract i.e., levy of tax on transfer of property in goods is enumerated in Entry 54 of List II under State Legislature. It is well settled that these laws are not free from disputes. This book is intended to highlight the basic provisions pertaining to works contract in 26 States.

The Constitution (Forty Sixth Amendment) Act, 1982, granted powers to State Governments to enact laws for providing the levy of tax on the transfer of property involved in the execution of works contract, which to hither was not possible in lieu of Honorable Supreme Courts decision in the case of State of Madras Vs. Gannon Dunkerley & Co (Mad) Ltd. [1958] 9 STC 353 (SC). Even after the said amendment in the Constitution of India on the subject under context, there still persist disputes between the trade and the tax authorities.

A works contract is a contract which involves labour as well as materials and where the materials are partially transferred. The quantum of materials could vary from contract to contract. The State law has the capability of only charging the




2

tax on the goods and is not in a position to tax the service element of the transaction.

As a result of the 46th Amendment to the constitution, the contract which was single and indivisible was altered by a legal fiction into a contract which could be divisible into contract for sale of goods and contract for supply of labour and services. If the legal fiction introduced by Article 366(29A)(b) is carried to its logical end, it follows that even in a single and indivisible works contract there is a deemed sale of the goods which are involved in the execution of a works contract. After the 46th amendment, it has become possible for the States to levy sales tax on the value of goods involved in a works contract in the same way in which the sales tax was leviable on the price of goods and materials.

The difference between a sale and a works contract is that a sale involves transfer of property in the goods whereas in a works contract, there is only a contract to render work on the customers property whether movable or immovable. Works Contract includes any agreement for carrying out for cash, deferred payment or other valuable consideration, the assembling, construction, building, altering, manufacturing, processing, fabrication, installation, fitting out, improvement, repair or commissioning of any moveable or immovable property. Transfer of goods involved in the execution of works contract is a deemed sale and therefore, works contract can be split into contract for labour and contract for sale. The transfer of property in goods involved in execution of works contract is chargeable to VAT. In arriving at the taxable turnover, various deductions from the contract receipts are allowed. The various deductions are in respect of labour charges, purchases of material from local registered dealers and payments to sub-contractors.

In the case of Gannon Dunkerley and Co Vs. State of Rajasthan (SC) 88 STC 204, the Honble Supreme Court held that the measure of levy of the tax contemplated by Article 366(29-A)(b) is the value of goods involved in the execution of works contract. The value of goods for levying tax can be assessed only on the basis of cost of acquisition of the goods by the contractor and not on the basis of the value at the time of incorporation of such goods in the works contract as incorporation of the goods in the works forms part of the contract relating to work and labour which is distinct from the contract for transfer of property in goods. Therefore, the cost of incorporation of goods in the works cannot be made a part of the measure for levy of tax contemplated by Article 366(29A)(b).



Introduction

3

Sale price in relation to transfer of property in goods whether as goods or in some other form is arrived at by deducting from the amount of valuable consideration paid or payable to a person for the execution of the works contract, the amount representing labour charges for such execution. In Gannon Drunkenly and company and others vs. State of Rajasthan and others (1993) 88 STC 204 (SC), it was stated that the value of the goods involved in the execution of works contract will have to be determined by taking into account the entire value of the contract and deducting there from the charges towards labour and other services. In other words labour, service and other charges not relatable to transfer of property has to be deducted from the total consideration of works contract. Where such labour and other service charges are not quantifiable, the sale price shall be the cost of acquisition of the goods and the margin of profit on them prevalent in the trade plus the cost of transferring the property in the goods and all other expenses in relation thereto till the property in them, whether as such or in any other form, passes to the Contractee and where the property passes in a different form shall include the cost of conversion. The value of the goods involved in the execution of a works contract will, therefore, have to be determined by taking into account the value of the entire works contract and deducting there from the charges towards labour and services which would cover :

(i) labour charges for execution of works

(ii) amount paid to sub-contractor for labour and service

(iii) charges for obtaining on hire or otherwise machinery and tool used for execution of the works contract

(iv) charges for planning, designing and architects fees

(v) cost of consumables used in the execution of the works contract

(vi) cost of establishment of the contractor to the extent it is relatable to supply of labour and services

(vii) other similar expenses relatable to supply of labour and services and

(viii) profit earned by the contractor to the extent it is relatable to supply of labour and services.

The transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract is sale of the goods. Under the VAT System, tax is to be charged on each sale of taxable goods and tax invoice




4

showing the tax element separately is to be issued in respect of every sale of taxable goods in the State by a registered dealer.

If a contractor-registered dealer is engaged in the execution of works contract of moveable property of a Contractee in the State and is not availing the composition scheme of paying a lump-sum amount in lieu of tax, then he will charge tax on the value of goods transferred in the works contract and will issue tax invoice to the Contractee. In case the Contractee is a registered dealer under the Act, he would claim input tax credit in respect of such goods received in the works contract from the contractor. The contractor-registered dealer will also be entitled to claim input tax credit in respect of the goods purchased from within the State, which were transferred in the execution of the works contract.

If a contractor-registered dealer is engaged in the execution of works contract of immovable property of a Contractee in the State and is not availing the composition scheme of paying a lump-sum amount in lieu of tax, then he will charge tax on the value of goods transferred in the works contract and will issue tax invoice to the Contractee. The Contractee would not be entitled to claim input tax credit in respect of the goods received in the works contract. However, the contractor registered dealer will be entitled to claim input tax credit in respect of the goods purchased in the State, which were transferred in the execution of the works contract.

If a contractor-registered dealer is availing composition scheme as applicable under the relevant State VAT Act and is engaged in the execution of works contract of immovable property of a Contractee in the State, then he is not entitled to charge tax in respect of the goods transferred in the works contract. The contractor registered dealer is also not entitled to claim input tax credit in respect of purchase of any goods from within the State, which were transferred in the execution of works contract of the immovable property to the Contractee. The Contractee registered dealer will also be not entitled to claim input tax credit in respect of the goods received by way of transfer in the works contract of immovable property from the contractor -registered dealer.

If a contractor-registered dealer is availing composition scheme as applicable under the relevant State VAT Act and is engaged in the execution of works contract of moveable property of a Contractee in the State, then he is not entitled to charge tax in respect of the goods transferred in the works contract and will not issue tax invoice to the Contractee. The contractor- registered dealer is also not entitled to claim input tax credit in respect of purchase of any goods from within the State, which were transferred in the execution of the works contract. The



Introduction

5

Contractee- registered dealer will also be not entitled to claim input tax credit in respect of the goods received by way of transfer in the works contract of moveable property, from the contractor registered dealer.

The rates of tax applicable to various kinds of works contract are specified in respective schedules. The transaction can be considered to be works contract generally only if there is any accession or accretion to the property of the customer. Purely labour contracts not involving supply of any goods by the contractor to his customer will not attract any VAT or works contract tax.

As a basic feature, tax is chargeable on the transfer of property in goods involved in the execution of works contract at the rates prescribed for the concerned goods in the schedules of the concerned State VAT legislation. Where value of each item of material transferred in the course of execution of works contract is identifiable, tax can be charged on the value of individual items of materials as provided under the schedules to the concerned State VAT Legislation. On inputs, the contractor is entitled to avail Input Tax Credit(ITC).

Most of the State VAT laws provide input tax credit on inputs used for executing Works Contract. Some States however, are not considering consumables at par with inputs. In case of composition schemes some States do not allow any input tax credit while in some States allow partial tax credit.

The following are certain important principles with respect to works contracts:

There should be transfer of property in goods. Pure labour contracts or service contracts are outside the purview of

the works contract under the State law. In case if any of the goods are consumed during the execution of works contract and their identity is lost and accordingly there is no transfer of property in goods then in such instance such consumables are not leviable to VAT under the State VAT law.

There must exist an individual and composite works contract. The divisible contracts are outside the scope of the works contract.

Transfer of property in goods must pass as goods or in some other form. Form of goods has no relevance.

In works contract transaction vesting of property must occur not by contract but on the theory of accretion and accession.




6

There must be dominant intention to affect the transfer of property in goods in execution of works contract, passing of the property in goods must not be only incidental to the contract.

Such transfer of property in goods may be in the form of goods itself or in some other form.

Such goods, which are being transferred, should be involved in the execution of works contract.

If any of the above said propositions are not fulfilled, then the activity is not covered under the scope of levy under VAT. However, there are numerous decisions in this context under various sales tax laws considering different types of activities independently. Therefore, though the above is only a broad principle, each transaction would be required to be examined in the light of the circumstances and the decided case laws as may be applicable to the goods dealt in with by them. Considering the above factors, it becomes essential to identify whether the activity is covered under the scope of levy in the course of execution of works contract or not. If it is so covered, then the next question would be the quantification of such levy. The quantification of tax levy will be based on the tax rate, which has to be applied on the value to be determined.



1. A

NDHR

A PR

ADES

H (A

.P.)

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

1. Is

works

con

tract

dealt

sep

arate

ly un

der t

he V

AT A

ct?

Is the

re a

dee

ming

pro

vision

dea

ling

with

works

contr

act?

Yes

Deem

ed a

s sa

le un

der t

he d

efinit

ion

of sa

le

Secti

on

4

(7)

is the

ch

argin

g se

ction

of

the

Andh

ra

Prad

esh

Value

Ad

ded

Tax A

ct, 2

005

(the

VAT

Act)

2. Is

there

any

spe

cific

form

to ap

ply fo

r re

gistra

tion

as

a wo

rks

contr

actor

(W

C) un

der V

AT la

w?

No se

para

te re

gistra

tion.

Secti

on

17 o

f the

VAT

Ac

t

3. W

hethe

r Non

- res

ident

(dea

ler ou

tside

the

state

) can

app

ly for

regis

tratio

n as

wo

rks co

ntrac

tor?

Ther

e is

no s

pecif

ic re

gistra

tion

for

works

co

ntrac

tor.

It is

only

regis

tratio

n as a

VAT

deale

r.

4 El

igible

Tur

nove

r for

regis

tratio

n `

7.5 la

khs

Secti

on 1

7 (5

) (g)

of t

he

VAT

Act

5. W

hat

are

the d

educ

tions

tha

t ar

e all

owab

le fro

m tur

nove

r?

Dedu

ction

s tow

ards

lab

our

comp

onen

t Ru

le 17

(1)

(e)

of

the

Andh

ra

Prad

esh

Value



Com

pilat

ion

of W

orks

Con

tract

Pro

visio

ns un

der V

AT L

aws o

f Diff

eren

t Sta

tes

8

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

Adde

d Ta

x Ru

les,

2005

(th

e VA

T Ru

les)

6. W

hethe

r the

WC

has

the o

ption

to

claim

the

labou

r cha

rges

and

like

on

actu

al ba

sis or

adho

c bas

is?

Till t

he p

rojec

t is

comp

leted

he

can

claim

on

adho

c ba

sis a

nd o

nce

it is

comp

leted

, the

sa

me

shou

ld be

cla

imed

on ac

tual b

asis.

Seco

nd

Prov

iso

unde

r Ru

le 17

(1) (

e) o

f the

VAT

Ru

les

7. Ho

w ar

e the

labo

ur c

harg

es a

nd li

ke

defin

ed un

der t

he V

AT la

w?

No

defin

ition

is pr

ovide

d in

the

Statu

te

8. W

hethe

r dep

recia

tion

can

be c

laime

d as

labo

ur ch

arge

s and

like?

If

yes,

then

wheth

er in

put t

ax c

redit

on

capit

al go

ods w

ill be

allow

able?

Statu

te do

es

not

prov

ide

for

dedu

ction

of

depr

eciat

ion b

ut it

is be

ing al

lowed

as pe

r cas

e law

. Th

ere

is no

dis

tincti

on

betw

een

capit

al go

ods

and

other

goo

ds i

n An

dhra

Pra

desh

.

9. Ca

n de

ducti

on b

e cla

imed

for

lan

d va

lue by

the c

ompo

sition

deale

r?

In the

cas

e of

build

er, w

ho o

pted

for

comp

ositio

n, tax

has

to b

e pa

id ev

en

on th

e va

lue o

f the

land

, whil

e se

lling

flat o

r villa

.



Andh

ra P

rade

sh

9

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

10.

How

is the

esti

mated

gro

ss p

rofit

comp

uted i

n cas

e of w

ork c

ontra

ct?

Also

, wha

t is th

e ra

tio to

app

ortio

n the

gr

oss

profi

t be

twee

n ma

terial

and

lab

our?

Gene

rally

boo

k pr

ofit i

s ad

opted

for

the pu

rpos

e.

11.

Whe

ther g

ross

pro

fits a

re to

be

adde

d to

actua

l lab

our

char

ges

and

like

or

adho

c lab

our c

harg

es an

d like

?

Profi

t re

latab

le to

labou

r is

dedu

ctable

.

12.

Whe

ther

water

, ele

ctrici

ty de

posit

s, sta

mp d

uty,

regis

tratio

n fee

, se

rvice

tax

, etc

form

part

of the

wor

ks co

ntrac

t tur

nove

r?

If the

se a

re c

ollec

ted a

s pa

rt of

sale

cons

idera

tion,

then

tax is

pay

able

on

the sa

me.

Ge

nera

lly,

these

ar

e se

para

tely

and

direc

tly

paid

by th

e buy

ers.

13.

Is co

ntrac

tor l

iable

to tax

for

fre

e su

pply

of go

ods b

y con

tracte

e?

The

contr

actor

is n

ot lia

ble t

o pa

y an

y tax

on

the

va

lue

of go

ods

wher

ein

the

contr

actee

su

pplie

s go

ods o

n fre

e bas

is.



Com

pilat

ion

of W

orks

Con

tract

Pro

visio

ns un

der V

AT L

aws o

f Diff

eren

t Sta

tes

10

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

14.

Wha

t is

the t

ime

of sa

le for

wor

ks

contr

actor

and

at w

hat p

oint o

f tim

e the

tax

sho

uld b

e off

ered

to

the

depa

rtmen

t?

Tax

shou

ld be

paid

on

trans

fer o

f pr

oper

ty in

good

s i.e

., on

inc

orpo

ratio

n of

good

s int

o the

wo

rks.

15.

Whic

h Se

ction

/ Sc

hedu

le pr

escri

bes

the ra

te of

tax fo

r wor

ks co

ntrac

t? Ta

x ha

s to

be

paid

on

the

incor

pora

tion

value

of t

he g

oods

at

the

rates

me

ntion

ed

in the

Sc

hedu

les to

the

Act i

n re

spec

t of

the go

ods e

nume

rated

ther

ein.

Secti

on 4

(7) (

a) (r

egula

r Sc

hem

e)

and

Secti

on .

4 (7

) (b

) &

(d)

(Com

posit

ion S

chem

e) o

f the

VAT

Act

Effec

tive

from

15.9.

2011

, the

ra

te of

tax

unde

r co

mpos

ition s

chem

e is 5

%

16.

Whe

ther

WC

will

be l

iable

to pa

y un

regis

tered

pur

chas

e tax

in a

dditio

n to

works

contr

act ta

x?

Ther

e is n

o suc

h pro

vision

.

Wor

ks c

ontra

ctor

is lia

ble

to pa

y ou

tput

tax,

no

purch

ase

tax n

eed

to be

pa

id.

17.

Wha

t is

the r

ate o

f tax

for

decla

red

good

s use

d in t

he co

urse

of co

ntrac

t? It i

s 5%

.

18.

Is sta

ndar

d de

ducti

on

metho

d av

ailab

le for

paym

ent?

Yes,

they a

re av

ailab

le

Rule

17 (1

) (g)

of th

e VAT

Ru

les



Andh

ra P

rade

sh

11

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

If ye

s, wh

at ar

e the

var

ious

rates

pr

escri

bed

for d

iffere

nt typ

es o

f wor

ks

contr

act?

They

are v

ary f

rom

15 %

to 40

%.

19.

Whe

ther c

ontra

ctee/

princ

ipal is

liable

to

dedu

ct Ta

x De

ducte

d at

Sour

ce

(TDS

) fro

m the

amo

unt

paya

ble t

o co

ntrac

tor?

Yes.

Contr

actee

is li

able

to de

duct

Tax D

educ

ted a

t Sou

rce (T

DS)/

Tax

Co

llecte

d at

Sour

ce (

TCS)

as

the

case

may

be.

Secti

on 22

(3)

(TDS

) and

Se

ction

22(

3A) (

TCS)

of

the V

AT A

ct

TCS

is ma

de

by

State

Go

vern

ment

depa

rtmen

ts an

d Loc

al au

thoriti

es.

20.

Wha

t is

the

rate

of TD

S to

be

dedu

cted i

n cas

e of w

orks

contr

act?

W

hethe

r inte

rstate

sup

plies

or i

mpor

t tra

nsac

tions

ar

e co

nside

red

for

dedu

cting

TDS

?

(a)

In re

spec

t of

road

wor

ks a

nd

cana

l lin

ing w

orks

the

rate

of

TDS

is 1.4

%

and

(b)

for ot

hers

it is 2

.8%.

A de

aler c

an re

ques

t the

ass

essin

g au

thority

to

redu

ce

the

TDS

perce

ntage

if th

ere

are

trans

actio

ns

fallin

g un

der C

entra

l Sale

s Ta

x Ac

t (C

ST) A

ct, 19

56.

Rule

18 of

the V

AT R

ules



Com

pilat

ion

of W

orks

Con

tract

Pro

visio

ns un

der V

AT L

aws o

f Diff

eren

t Sta

tes

12

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

21.

Is the

con

tracto

r also

liable

to d

educ

t TD

S fro

m the

amo

unt p

ayab

le to

the

Sub-

Contr

actor

?

Contr

actor

can

not

make

TDS

fro

m ou

t of t

he a

moun

ts pa

id to

the s

ub

contr

actor

.

22.

Whe

ther t

he W

C ca

n cla

im in

put t

ax

credit

on co

nsum

ables

?

Ther

e is

no p

rohib

ition

on c

laimi

ng

Input

Tax

Cred

it (IT

C)

on

cons

umab

les,

if the

y ar

e us

ed f

or

busin

ess.

23.

Whe

ther d

educ

tion

for s

ub c

ontra

ctor

turno

ver is

perm

itted f

rom

the tu

rnov

er

of W

C?

Does

WC

have

the

opti

on t

o cla

im

input

tax

credit

(IT

C)

in lie

u of

dedu

ction

from

total

turn

over

?

If the

sub

con

tracto

r is

a re

gister

ed

VAT

deale

r, the

main

con

tracto

r can

cla

im

dedu

ction

on

the

co

ntrac

t re

ceipt

s.

Main

contr

actor

is

not

eligib

le to

claim

any I

TC in

such

situa

tion.

24.

Whe

ther i

nput

tax c

redit

is a

llowa

ble

fully

in ca

se of

wor

ks co

ntrac

t? If

the co

ntrac

tor is

und

er co

mpos

ition

sche

me, IT

C is

not a

llowe

d.



Andh

ra P

rade

sh

13

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

25.

Is the

re a

ny s

pecif

ic for

mat o

f inv

oice

or b

ill for

reg

ular

and

comp

ositio

n W

C?

No sp

ecific

form

at.

26.

Can

runn

ing

bill

be

treate

d as

inv

oice?

W

hethe

r adv

ance

s re

ceive

d inc

luding

mo

biliza

tion

adva

nce

will

be li

able

to tax

?

Runn

ing A

ccou

nt (R

A) b

ill is

the

base

. Ad

vanc

es

are

not

liable

to

tax

beca

use

there

is

no

trans

fer

of pr

oper

ty in

good

s bu

t whe

n ad

vanc

e is

adjus

ted ta

x is p

ayab

le.

27.

Is it c

ompu

lsory

for th

e sub

- con

tracto

r to

be a

reg

ister

ed d

ealer

and

file

re

turns

de

clarin

g the

tur

nove

r pe

rtaini

ng to

main

contr

actor

?

Yes.

Such

cond

ition i

s the

re

Secti

on 4

(7)

(h)

of

the

VAT

Act

28.

Can

sub

contr

actor

claim

exe

mptio

n if

main

contr

actor

pays

tax?

If

the

main

contr

actor

op

ts for

co

mpos

ition,

then

only

sub-

co

ntrac

tor is

not li

able

to tax

.



Com

pilat

ion

of W

orks

Con

tract

Pro

visio

ns un

der V

AT L

aws o

f Diff

eren

t Sta

tes

14

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

29.

Whe

ther c

ontra

ctor o

r sub

-contr

actor

ar

e ex

empte

d in

case

any

one

of

the

two

unde

rtake

s to

disch

arge

VA

T lia

bility

on

the

en

tire

cons

idera

tion?

No s

uch

prov

ision

. Stat

ute d

oes

not

pres

cribe

any s

uch u

nder

taking

.

30.

Does

the

WC

have

an

optio

n to

pay

tax un

der c

ompo

sition

categ

ory?

Ye

s, If

WC

wants

, he

can

opt t

o pa

y un

der c

ompo

sition

sche

me.

Secti

on 4

(7) (

a) (R

egul

ar

Sche

me)

and

Secti

on 4

(7)

(b)

& (

c) (C

ompo

sitio

n Sc

hem

e)

of the

VAT

Act

By d

efault

, tax

has

to b

e pa

id un

der r

egula

r sch

eme

in ca

se

optio

n for

co

mpos

ition i

s not

avail

ed.

31.

Is co

mpos

ition

WC

allow

ed to

mak

e int

ersta

te / im

port

purch

ases

? W

C ca

n ma

ke

impo

rt/

inter

state

purch

ase.

32.

Is co

mpos

ition

WC

eligib

le to

take

sub

contr

actor

dedu

ction

s?

If the

sub

con

tracto

r is

payin

g tax

, be

ing a

reg

ister

ed V

AT d

ealer

, the

qu

estio

n of

main

contr

actor

opti

ng

for c

ompo

sition

doe

s no

t ar

ise,

as

there

is no

liabil

ity on

him.

Ho

weve

r, if

the

main

contr

actor

op

ts for

co

mpos

ition,

then

the s

ub

contr

actor

to th

at ex

tent i

s no

t liab

le to

tax.



Andh

ra P

rade

sh

15

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

33.

Whe

ther

WC

can

opt

for

regu

lar

sche

me

for

one

proje

ct an

d co

mpos

ition

sche

me

for

other

pr

oject?

Comp

ositio

n ca

n be

pro

ject-w

ise a

nd

it is p

ermi

tted.

34.

Is the

re a

ny p

roce

dure

to c

hang

e the

sc

heme

from

reg

ular

to co

mpos

ition

works

contr

actor

?

A co

ntrac

tor c

an o

pt for

com

posit

ion

only

befor

e he

co

mmen

ces

the

exec

ution

of a

partic

ular p

rojec

t.

35.

Is the

re a

ny p

roce

dure

to c

hang

e the

sc

heme

from

com

posit

ion to

reg

ular

works

contr

actor

?

Not p

ermi

tted.

36.

Wha

t ar

e the

com

posit

ion r

ates

for

differ

ent ty

pes o

f con

tracts

? (a

) Fo

r all c

ontra

cts it

is on

ly 5%

. (b

) In

the c

ase

of bu

ilder

s, it

is 1.2

5%

(i.e 5

% o

n 25

% o

f the

gr

oss r

eceip

ts)

37.

Whe

ther

WC

optin

g for

com

posit

ion

metho

d is

requ

ired

to tak

e pr

ior

perm

ission

/ pro

vide

intim

ation

to th

e de

partm

ent?

Only

intim

ation

in fo

rm V

AT 2

50 h

as

to be

file

d an

d ac

know

ledgm

ent

need

s to b

e obta

ined.

Rule

17 (2

) (3)

and

(4) o

f the

VAT

Rule

s Fo

rm V

AT 25

0



Com

pilat

ion

of W

orks

Con

tract

Pro

visio

ns un

der V

AT L

aws o

f Diff

eren

t Sta

tes

16

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

38.

Whe

ther

comp

ositio

n de

aler

can

apply

for in

tersta

te wo

rks co

ntrac

t? Th

ere

is no

co

nnec

tion

betw

een

comp

ositio

n un

der V

AT A

ct an

d int

er

State

wor

ks co

ntrac

t. Int

er-S

tate

works

co

ntrac

ts ar

e tax

able

unde

r CST

Act.

and

ther

e is

no c

ompo

sition

sch

eme

unde

r CST

Ac

t.

39.

Whe

ther s

uch

WC

is re

quire

d to

file

month

ly/ qu

arter

ly re

turn?

W

hat

is the

due

date

of

filing

the

re

turn?

Month

ly re

turn

It ha

s to

be f

iled

by t

he 2

0th o

f su

ccee

ding m

onth.

Secti

on 22

of th

e VAT

Act

40.

Whe

ther A

nnua

l Retu

rn is

filed

by

the

works

contr

actor

? Th

ere i

s no s

uch a

nnua

l retur

n.

41.

Wha

t is

the ti

me lim

it for

Ass

essm

ent

in ca

se of

wor

ks co

ntrac

tor?

Sche

me is

self a

sses

smen

t bas

is.

Ho

weve

r, the

dep

artm

ent

has

time

for fo

ur y

ears

to ma

ke as

sess

ment.



Andh

ra P

rade

sh

17

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

42.

Whe

ther

VAT

Audit

pr

ovisi

ons,

if ap

plica

ble u

nder

the

State

VAT

law,

ap

ply to

WC

as w

ell?

If

yes,

what

is the

turn

over

limi

t for

su

ch au

dit?

Ther

e is

no m

anda

tory

audit

by

eithe

r Sale

s Ta

x Pr

actio

ner (

STP)

or

Char

tered

Ac

coun

tant

(CA)

in

Andh

ra P

rade

sh.

On th

eir o

wn o

fficer

s co

nduc

t aud

it pe

riodic

ally.

43.

Whe

ther V

AT is

app

licab

le on

sale

of

flats

by th

e dev

elope

r per

tainin

g to t

he

shar

e of

deve

loped

are

a in

case

of

cons

tructi

on co

ntrac

ts?

On th

e gr

oss

cons

idera

tion

rece

ived

or re

ceiva

ble fo

r the

sale

of fla

t/ vil

la/

comp

lex i

nclud

ing l

and

value

, the

bu

ilder

is lia

ble to

pay t

ax @

1.25

%

Secti

on 4

(7)

(d)

of

the

VAT

Act

It is c

ompo

sition

sche

me.

44.

Is the

re a

requ

ireme

nt to

file th

e co

py

of co

ntrac

t /

agre

emen

ts wi

th the

de

partm

ent?

As a

nd w

hen

dema

nded

, it m

ust b

e file

d.



2.

ARU

NACH

AL P

RADE

SH

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

1. Is

works

con

tract

dealt

sep

arate

ly un

der t

he V

AT A

ct?

Is the

re a

dee

ming

pro

vision

dea

ling

with

works

contr

act?

Wor

ks c

ontra

ct ha

s be

en d

ealt

with

sepa

ratel

y un

der

the

Arun

acha

l Pr

ades

h Go

ods

Tax

Act,

2005

(the

VA

T Ac

t) un

der S

ectio

n 5(

2) o

f the

VA

T Ac

t. As

per S

ectio

n 2(

zq) o

f the s

aid A

ct,

Wor

ks

Cont

ract

inc

ludes

an

y ag

reem

ent f

or c

arryi

ng o

ut for

cas

h or

for

de

ferre

d pa

ymen

t or

for

va

luable

con

sider

ation

, the

buil

ding

cons

tructi

on,

manu

factur

e, pr

oces

sing,

fabric

ation

, er

ectio

n, ins

tallat

ion, f

itting

out,

impr

ovem

ent,

repa

ir or

co

mmiss

ioning

of

any

mova

ble

or

immo

vable

pr

oper

ty.

Secti

on

2(zq

) an

d 2(

zf)(v)

of th

e VAT

Act.



Arun

acha

l Pra

desh

19

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

Also

the

re i

s a

menti

on o

f sa

le inc

luding

the

trans

fer o

f pro

perty

in

good

s (wh

ether

as go

ods o

r in s

ome

other

form

) inv

olved

in th

e ex

ecuti

on

of a

works

co

ntrac

t un

der

Secti

on 2(

zf)(v)

of th

e VAT

Act.

2.

Is the

re a

ny s

pecif

ic for

m to

apply

for

regis

tratio

n as

a

works

co

ntrac

tor

(WC)

unde

r VAT

law?

Ther

e is

no

spec

ific

form

of ap

plica

tion

for re

gistra

tion

as w

orks

co

ntrac

tor. T

he w

orks

contr

actor

has

to ap

ply i

n the

gen

eral

form

of re

gistra

tion

i.e.,

Form

RF

-01,

RF-0

2, RF

-03,

RU-0

1, RN

-02

as

appli

cable

in di

ffere

nt ca

ses.

On

ly for

ro

ad

trans

porte

r an

d wa

reho

use

appr

oval

sepa

rate

forms

ar

e the

re vi

z, Fo

rm T

R-01

and

For

m W

A-01

resp

ectiv

ely.

Secti

on 2

0, 21

, 22

of the

VA

T Ac

t re

ad

with

Rule

15, 1

6, 17

, 18,

21,

22

of the

Ar

unac

hal

Prad

esh

Good

s Ta

x Ru

les,

2005

. (th

e VA

T Ru

les)



Com

pilat

ion

of W

orks

Con

tract

Pro

visio

ns un

der V

AT L

aws o

f Diff

eren

t Sta

tes

20

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

3. W

hethe

r No

n-

resid

ent

(dea

ler

outsi

de

the

state)

ca

n ap

ply

for

regis

tratio

n as w

orks

contr

actor

?

Yes.

4. El

igible

Tur

nove

r for

regis

tratio

n. `

5 lac

s is

the T

axab

le Qu

antum

as

per V

AT A

ct.

Secti

on 1

9(2)

of t

he V

AT

Act

5. W

hat

are

the d

educ

tions

tha

t ar

e all

owab

le fro

m tur

nove

r?

For

deter

mina

tion

of the

tax

able

turno

ver,

the f

ollow

ing d

educ

tions

ar

e all

owed

in re

spec

t of t

he a

moun

t of

the c

harg

es to

ward

s go

ods

when

go

ods

are

asce

rtaina

ble (i

n ca

se o

f wo

rks co

ntrac

t):

(a)

the tu

rnov

er of

sales

not

subje

ct to

tax u

nder

Sec

tion

7 o

f the

VA

T Ac

t; (b

) ch

arge

s tow

ards

labo

ur, s

ervic

e an

d oth

er

like

char

ges

Secti

on 5

, 6 a

nd 7

of t

he

VAT

Act

and

Rule

5 of

the V

AT R

ules.



Arun

acha

l Pra

desh

21

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

pres

cribe

d in

Rule

5 of

the V

AT

Rules

; (c)

the

turn

over

of s

ales

of go

ods

decla

red

exem

pt un

der S

ectio

n 6 o

f the V

AT A

ct.

6. W

hethe

r the

WC

has

the o

ption

to

claim

the

labou

r cha

rges

and

like

on

actua

l bas

is or

adho

c bas

is?

Wor

ks

contr

actor

ca

n cla

im

the

dedu

ction

for

lab

our

and

like

char

ges

on

actua

l ba

sis

if the

am

ounts

of c

harg

es to

ward

s go

ods

are

asce

rtaina

ble;

Whe

n un

asce

rtaina

ble,

the

works

co

ntrac

tor s

hall

pay

tax o

n the

sale

pr

ice

after

de

ducti

ng

a ce

rtain

perce

ntage

as pe

r Rule

s.

Secti

on

5(2)

of t

he V

AT

Act

read

with

Rule

5 o

f the

VAT

Rule

s.

7. Ho

w ar

e the

labo

ur c

harg

es a

nd li

ke

defin

ed un

der t

he V

AT la

w?

The

char

ges

towar

ds

labou

r an

d se

rvice

s an

d oth

er li

ke c

harg

es s

hall

includ

e:

(a)

Labo

ur c

harg

es fo

r ex

ecuti

on o

f

Rule

5(2)

of

the

VAT

Rules

.



Com

pilat

ion

of W

orks

Con

tract

Pro

visio

ns un

der V

AT L

aws o

f Diff

eren

t Sta

tes

22

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

works

; (b

) Ch

arge

s for

pla

nning

an

d ar

chite

cts fe

es;

(c) C

harg

es fo

r obta

ining

on

hire

or

other

wise

mac

hiner

y an

d too

ls us

ed f

or t

he e

xecu

tion

of the

wo

rks co

ntrac

t; (d

) Co

st of

cons

umab

les s

uch

as

water

, elec

tricity

, fuel,

etc.

used

in

the

exec

ution

of

the

works

co

ntrac

t the

pro

perty

in w

hich

is no

t tra

nsfer

red

in the

cou

rse o

f ex

ecuti

on of

a wo

rks co

ntrac

ts;

(e)

Cost

of es

tablis

hmen

t of

the

contr

actor

to

the

exten

t it

is re

latab

le to

supp

ly of

labou

r and

se

rvice

s;

(f)

Othe

r sim

ilar e

xpen

ses

relat

able



Arun

acha

l Pra

desh

23

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

to su

pply

of lab

our a

nd se

rvice

s;

(g) P

rofits

earn

ed by

the c

ontra

ctor t

o the

exte

nt it i

s re

latab

le to

supp

ly of

labou

r and

ser

vices

sub

ject t

o fur

nishin

g of

a pr

ofit

and

loss

acco

unt o

f the w

orks s

ites.

Prov

ided

wher

e am

ount

of ch

arge

s tow

ards

lab

our

and

servi

ce

are

not

asce

rtaina

ble

from

the a

ccou

nts o

f the

dea

ler,

the a

moun

t of s

uch

char

ges s

hall

be c

alcula

ted a

t the

per

centa

ges

as pe

r Rule

s. 8.

Whe

ther d

epre

ciatio

n ca

n be

clai

med

as la

bour

char

ges a

nd lik

e?

If ye

s, the

n wh

ether

inpu

t tax

cred

it on

Depr

eciat

ion

on m

achin

ery

and

tools

used

in th

e ex

ecuti

on o

f wor

ks

contr

act is

not

allow

ed a

s lab

our a

nd

like

char

ges

as t

here

is

no s

uch

inclus

ion in

Rule

5(2)

.

Rule

5(2)

of

the

VAT

Rules

; Se

ction

9(

1)

and

Secti

on 3

(im

posit

ion o

f tax

) of th

e VAT

Act.

No

sepa

rate

Secti

on

defin

ing t

he t

ax c

redit

in

case

of w

orks

contr

act.



Com

pilat

ion

of W

orks

Con

tract

Pro

visio

ns un

der V

AT L

aws o

f Diff

eren

t Sta

tes

24

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

capit

al go

ods w

ill be

allow

able?

Ho

weve

r, un

der R

ule 5(

2) of

the V

AT

Rules

cha

rges

for o

btaini

ng o

n hir

e or

oth

erwi

se m

achin

ery

and

tools

used

for

the

ex

ecuti

on

of the

wor

ks co

ntrac

t ar

e allo

wed.

If

a co

ntrac

tor

uses

his

ow

n ma

chine

ry an

d too

ls in

the e

xecu

tion

of a w

orks

co

ntrac

t, wh

ich

he

other

wise

co

uld

have

hir

ed

from

outsi

de,

then

depr

eciat

ion j

ust

like

hire

char

ges

on s

uch m

achin

ery

and

tools

shou

ld be

allow

ed.

As p

er S

ectio

n 9

(1),

ever

y go

ods

impo

rted

or p

urch

ased

whic

h ar

e us

ed d

irectl

y or

ind

irectl

y by

the

de

aler

for t

he p

urpo

se o

f ma

king

Secti

on 1

5 of

the V

AT

Act.



Arun

acha

l Pra

desh

25

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

sale

which

are

liab

le to

tax u

nder

se

ction

3 o

f the

Act;

and

whic

h ar

e no

t liab

le to

tax u

nder

sec

tion

7 ar

e en

titled

to

credit

. He

nce,

input

tax

credit

on

ca

pital

good

s is

also

allow

able.

How

ever

, Sec

tion

15(

1),

(2),

(3)

states

tha

t in

case

of

treatm

ent

of sto

ck b

roug

ht for

ward

du

ring

trans

ition,

no in

put t

ax c

redit

for

finish

ed g

oods

or c

apita

l goo

ds is

all

owed

. Ho

weve

r, un

der

simpli

fied

acco

untin

g me

thod

no

input

tax

credit

is av

ailab

le.

9. Ca

n de

ducti

on b

e cla

imed

for

lan

d va

lue by

the c

ompo

sition

deale

r?

Dedu

ction

for

the v

alue

of lan

d is

allow

able

in the

ha

nds

of a

simpli

fied a

ccou

nting

meth

od de

aler.



Com

pilat

ion

of W

orks

Con

tract

Pro

visio

ns un

der V

AT L

aws o

f Diff

eren

t Sta

tes

26

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

Howe

ver,

it is n

ot wr

itten

spec

ificall

y in

eithe

r the

Act

or th

e Rule

s. 10

. Ho

w is

the e

stima

ted g

ross

pro

fit co

mpute

d in c

ase o

f wor

k con

tract?

Al

so, w

hat is

the

ratio

to a

ppor

tion

the

gros

s pr

ofit

betw

een

mater

ial a

nd

labou

r?

Ther

e is

no

spec

ific

rule

for

estim

ation

of g

ross

pro

fit in

case

of

works

con

tract

or fo

r dete

rmina

tion

of the

rati

o of

appo

rtionm

ent

of gr

oss

profi

t be

twee

n ma

terial

and

lab

our.

Such

esti

matio

n ma

y be

ma

de o

n the

bas

is of

cost

incur

red

for v

ariou

s co

mpon

ents

and

the

value

of

the w

orks

con

tract

to be

ex

ecute

d.

11.

Whe

ther g

ross

pro

fits a

re to

be

adde

d to

actua

l lab

our

char

ges

and

like

or

adho

c lab

our c

harg

es an

d like

?

Profi

t ear

ned b

y the

contr

actor

to th

e ex

tent

it is

relat

able

to su

pply

of lab

our

and

servi

ces

will

be

dedu

ctible

from

the

turno

ver s

ubjec

t to

furnis

hing

of the

pro

fit an

d los

s

Rule

5(2)

(g)

of the

the

VA

T Ru

les.



Arun

acha

l Pra

desh

27

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

acco

unt o

f the w

orks

sites

. 12

. W

hethe

r wa

ter,

electr

icity

depo

sits,

stamp

duty

, re

gistra

tion

fee,

servi

ce

tax, e

tc for

m pa

rt of

the w

orks

contr

act

turno

ver?

For d

eterm

inatio

n of

tax p

ayab

le by

the

dea

ler fo

llowi

ng d

educ

tions

from

tax

able

turno

ver a

re a

llowe

d un

der

Rule

5 (2)

of th

e VAT

Rule

s: (a

) lab

our c

harg

es fo

r exe

cutio

n of

works

contr

act;

(b) c

harg

es fo

r plan

ning,

desig

ning

and a

rchite

cts f

ees;

(c) c

harg

es fo

r obta

ining

on

hire

or

other

wise

mac

hiner

y an

d too

ls us

ed

for

the

exec

ution

of

the

works

co

ntrac

t; (d

) co

st of

cons

umab

les s

uch

as

water

, ele

ctrici

ty, f

uel e

tc. u

sed

in the

exe

cutio

n of

works

con

tract,

the

prop

erty

in wh

ich is

not

trans

ferre

d in

the c

ourse

of

exec

ution

of

the

Rule

5(2)

of

the

VAT

Rules

.



Com

pilat

ion

of W

orks

Con

tract

Pro

visio

ns un

der V

AT L

aws o

f Diff

eren

t Sta

tes

28

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

works

contr

act;

(e)

cost

of es

tablis

hmen

t of

the

contr

actor

to th

e ex

tent it

is re

latab

le to

supp

ly of

labou

r an

d se

rvice

s; an

d (f)

Othe

r sim

ilar e

xpen

ses

relat

able

to su

pply

of lab

our a

nd se

rvice

s. (g

) pro

fits e

arne

d by

the

contr

actor

to

the e

xtent

it is

relat

able

to su

pply

of lab

our

and

servi

ces

subje

ct to

furnis

hing

of a

profi

t an

d los

s ac

coun

t of th

e wor

ks si

tes;

Dedu

ction

s in r

espe

ct of

stamp

duty

, re

gistra

tion

fee, a

nd s

ervic

e tax

are

no

t av

ailab

le fro

m the

tax

able

turno

ver

unde

r the

VAT

Act

and

rules

.



Arun

acha

l Pra

desh

29

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

13.

Is co

ntrac

tor l

iable

to tax

for

fre

e su

pply

of go

ods b

y con

tracte

e?

In the

case

of f

ree

supp

ly, th

e wo

rks

contr

actor

is no

t liab

le to

tax.

Furth

er,

wher

e ma

terial

has

bee

n su

pplie

d by

prin

cipal

and

the co

st of

such

goo

ds h

as b

een

dedu

cted

by

the

princ

ipal

from

the

amou

nt pa

yable

to th

e co

ntrac

tor, d

educ

tion

is no

t allo

wed a

nd is

taxa

ble.

14.

Wha

t is

the t

ime

of sa

le for

wor

ks

contr

actor

and

at w

hat p

oint o

f tim

e the

tax

sho

uld b

e off

ered

to

the

depa

rtmen

t?

The

net t

ax o

f a d

ealer

shall

be

paid

withi

n 28

day

s of

the c

onclu

sion

of the

deale

rs ta

x per

iod.

Expla

natio

n: T

he n

et tax

of a

dea

ler

shall

be

paid

at the

sam

e tim

e as

fur

nishin

g a re

turn,

but th

e obli

gatio

n to

pay

arise

s by

virtu

e of

the a

bove

pr

ovisi

on a

nd is

not

depe

nden

t on

furnis

hing

a re

turn,

nor o

n the

issu

e

Secti

on 3

(4)

of the

VAT

Ac

t.



Com

pilat

ion

of W

orks

Con

tract

Pro

visio

ns un

der V

AT L

aws o

f Diff

eren

t Sta

tes

30

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

of a

notic

e of

asse

ssme

nt to

the

deale

r. 15

. W

hich

Secti

on

/ Sch

edule

pre

scrib

e the

rate

of tax

for w

orks

contr

act?

Secti

on 4

(1)

of the

VAT

Act

deals

wi

th the

rate

of

tax u

nder

wor

ks

contr

act.

Secti

on 5

(2) o

f the

VAT

Act

will

be

appli

cable

for

the

dete

rmina

tion

of tax

able

turno

ver

arisi

ng f

rom

the

exec

ution

of th

e Wor

ks C

ontra

ct.

Secti

on

17 o

f the

VAT

Act

and

Rule

12(1

0) a

nd (

11)

of the

VAT

Ru

les d

eals

with

the ra

te of

tax a

nd

lays

down

the

cond

itions

reg

ardin

g sim

plifie

d ac

coun

ting

metho

ds

appli

cable

to w

orks

contr

act.

Secti

on

4, 5

and

17 o

f the

VAT

Act;

Fo

r the

wor

ks c

ontra

ct me

thod,

Rule

12 o

f the

VA

T Ru

les to

be re

ferre

d.

16.

Whe

ther

WC

will

be l

iable

to pa

y un

regis

tered

pur

chas

e tax

in a

dditio

n to

works

contr

act ta

x?

Yes,

as

no

input

tax

credit

is

allow

able

for p

urch

ase

of go

ods

from

unre

gister

ed

deale

r as

Secti

on 9

(2) &

(7) o

f the

VA

T Ac

t.



Arun

acha

l Pra

desh

31

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

menti

oned

in S

ectio

n 9

(2) &

(7) o

f the

VAT

Act.

Ho

weve

r, in

case

of

purch

ase

of se

cond

ha

nd

good

s fro

m un

regis

tered

dea

ler,

the c

redit

will

only

be a

llowe

d if

an i

nvoic

e or

re

ceipt

sig

ned

by

such

re

siden

t se

ller

(who

is

not

regis

tered

) is

prod

uced

. Th

e co

ntents

of

the

invoic

e are

: (a

) the

natur

e of th

e goo

ds;

(b)

the am

ount

paid

for th

e goo

ds;

(c)

the na

me of

the s

eller

; (d

) the

se

llers

ad

dres

s in

Arun

acha

l Pra

desh

; and

(e

) Th

e or

igina

l invo

ice s

epar

ately

indica

ting

the ta

x co

mpon

ent.

[Rule

10]

Rule

10

of the

VA

T Ru

les.



Com

pilat

ion

of W

orks

Con

tract

Pro

visio

ns un

der V

AT L

aws o

f Diff

eren

t Sta

tes

32

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

17.

Wha

t is

the r

ate o

f tax

for

decla

red

good

s use

d in t

he co

urse

of co

ntrac

t? Ra

te of

tax fo

r dec

lared

goo

ds u

sed

in the

cour

se of

contr

act is

4%.

18.

Is sta

ndar

d de

ducti

on

metho

d av

ailab

le for

paym

ent?

If

yes,

what

are

the v

ariou

s ra

tes

pres

cribe

d for

diffe

rent

types

of w

orks

co

ntrac

t?

Stan

dard

ded

uctio

n is

avail

able

for

each

type

of w

orks

con

tract

wher

e the

dea

ler d

oes

not m

aintai

n bo

oks

of ac

coun

ts for

ide

ntific

ation

of

labou

r cha

rges

whic

h is

menti

oned

in

Anne

xure

8.

Rule

30(2

) of

the V

AT

Rules

19.

Whe

ther c

ontra

ctee

/ prin

cipal

is lia

ble

to de

duct

TDS

from

the

amou

nt pa

yable

to co

ntrac

tor?

It is

for g

ener

al inf

orma

tion

to all

co

ncer

ned

that

tax

dedu

ction

at

sour

ce (

TDS)

for

VAT

has

bee

n int

rodu

ced

w.e.f

. 11th

Apr

il 20

07 b

y ma

king

an

amen

dmen

t in

the

Arun

acha

l Pra

desh

Goo

ds T

ax A

ct,

2005

. An

y tax

ded

ucted

sha

ll be

paid

into

the G

over

nmen

t acc

ount

on b

ehalf

Circ

ular

No.-0

7 da

ted

22nd

Sep

tem

ber,

2009



Arun

acha

l Pra

desh

33

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

of the

per

son

from

whos

e bil

ls an

d inv

oice

the

dedu

ction

ha

s be

en

made

and

sam

e sh

all b

e de

posit

ed

by C

halla

n No

FF-

08 u

nder

Hea

d of

Acco

unt

0040

. Th

e pe

rson

makin

g an

y de

ducti

on o

f tax

at s

ource

and

pa

ying

it int

o the

Go

vern

ment

acco

unt

shall

iss

ue t

o the

pay

ee

intim

ation

/ ce

rtifica

te of

tax

dedu

ction

at so

urce

and p

ayme

nt.

20.

Wha

t is

the

rate

of TD

S to

be

dedu

cted i

n cas

e of w

orks

contr

act?

W

hethe

r inte

rstate

sup

plies

or i

mpor

t tra

nsac

tions

ar

e co

nside

red

for

dedu

cting

TDS

?

Not

spec

ified

in the

Ar

unac

hal

Prad

esh

Good

s Ta

x Ac

t, 20

05 a

nd

Arun

acha

l Pr

ades

h Go

ods

Tax

Rules

, 200

5.



Com

pilat

ion

of W

orks

Con

tract

Pro

visio

ns un

der V

AT L

aws o

f Diff

eren

t Sta

tes

34

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

21.

Is the

con

tracto

r also

liable

to d

educ

t TD

S fro

m the

amo

unt p

ayab

le to

the

Sub-

Contr

actor

?

Poin

t no.

31

22.

Whe

ther t

he W

C ca

n cla

im in

put t

ax

credit

on co

nsum

ables

?

Altho

ugh

no s

pecif

ic pr

ovisi

on f

or

allow

ing

input

tax

credit

on

co

nsum

ables

exis

ts un

der t

he la

w, it

is as

sume

d tha

t inp

ut tax

cre

dit is

all

owab

le for

cons

umab

les.

Secti

on 9

(1)

of the

VAT

Act

gives

im

porta

nce

to the

use

of g

oods

for

the p

urpo

se o

f mak

ing s

ale a

nd n

ot the

kind

s of g

oods

. Fu

rther

, Sec

tion

9(2)

of th

e VAT

Act

does

not

includ

e co

nsum

ables

as

disall

owed

.

Secti

on 9

(1) &

9(2

) of t

he

VAT

Act.



Arun

acha

l Pra

desh

35

Sl.

No.

Parti

cular

s Pa

rticu

lars

Relev

ant S

ectio

n /

Rule

Rem

arks

23.

Whe

ther d

educ

tion

for s

ub c

ontra

ctor

turno

ver is

perm

itted f

rom

the tu

rnov

er

of W

C?

Does

WC

have

the

opti

on t

o cla

im

input

tax c

redit

in li

eu o

f de

ducti

on

from

total

turno

ver?

The

works

con

tracto

r is

entitl

ed to

cla

im d

educ

tion

towar

ds a

moun

ts pa

id to

the

sub-

contr

actor

s for

ex

ecuti

on

of the

wo

rks

contr

act

subje

ct to

prod

uctio

n of

proo

f to

the

satis

factio

n of

the

Comm

ission

er

that:

(a)

the

sub-

contr

actor

is

a re

gister

ed d

ealer

liab

le to

pay

tax un

der t

he V

AT A

ct; an

d (b

) de

ducti

on ca

n be c

laime

d on

the

stren

gth o

f an

invoic

e ra

ised

by

the su

b con

tracto

r (c)

The

re is

no

furthe

r tra

nsfer

of

good

s in

any

form

by th

e su

b co

ntrac

tor

to the

wo

rks

contr

actor

exc

ept

as s

hown

in

the in

voice

of th

e sub

contr

actor

.



compilation of works contract provisions under vat laws o

Documents

state taxes

statelevel vat

introduction of vat

work contract

vat legislation

respect of state

foreword laws

indirect taxes committee