Tuesday, 7 April 2015

The summary of the Main Points with regard to provisions of levy of VAT/Composition Tax under the State VAT Act & Rules.

  • Deemed Sales (WC) are taxed under the provisions of the State VAT Act, there are no separate Works Contract Acts.
  • For local works contract transaction State VAT (WC) is applicable and for interstate works contract transaction , the Central Sales Tax (C.S.T.) is applicable as covered under the CST Act.
  • No VAT/CST is applicable on the pure labour Jobs (No material of the Contractor / Job worker is involved)
  • Under the State VAT Acts, VAT is applicable on the `Material Value” of the Contracts only as determined by the three options as discussed earlier and under the C.S.T.Act also CST is applicable on the `Material Value’ only.
  • In the contracts , `where both the sale of goods and rendering of Taxable service are involved, both VAT & Service Tax is payable on the same contract price subject to the relevant provisions under both the VAT & Service Tax Laws.
  • Proper clauses of VAT/CST should be incorporated in the Agreements between the Contractor and Contractee to avoid litigation.
  • Under the VAT System both the Contractor and the Contractee can avail full VAT set off/Credit subject to the Negative List.
  • The Contractee should ask for the price reduction from the Contractor to pass on the `VAT Benefit’ availed by the Contractor on his local purchases.
I am sure the Readers will get useful information in this article on “VAT & Works Contracts” and both the Contractor and Contractee can plan their works contracts transactions in a better and cheaper way in future.

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