Compilation of Works Contract Provisions Under VAT Laws of Different States 2

7/24/2019 Compilation of Works Contract Provisions Under VAT Laws of Different States 2

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Th I tit t f Ch t d A t t f I di

Compilation

ofWorks Contract Provisions under

VAT Laws of Different States


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Compilation ofWorks Contract

Provisionsunder VAT

Laws of Different States

TheInstituteofCharteredAccountantsofIndia(Set

up

by

an

Act

of

Parliament)

NewDelhi


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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 aretrieval system, or transmitted, in any form, or by any means, electronicmechanical, 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 theInstitute of Chartered Accountants of India,ICAI Bhawan, Post Box No. 7100, IndraprasthaMarg, New Delhi - 110 002.

Printed by : Sahitya Bhawan Publications, Hospital Road,Agra 282 003March/2013/1,000 Copies


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Foreword

Laws and rules relating to indirect taxes have been evolving on account ofdevelopment in business models, economic growth of the country, globaldevelopments, 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 stepforward in the reform of domestic trade taxes in India. Introduction of VAT inthe States has been a more challenging exercise in a federal country likeIndia, where each State, in terms of Constitutional provision, is sovereign inlevying 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 countrybut every State has its own VAT legislation and procedures differ on manycounts from one State to another. It is often found that information in respectof 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 bringingout a Compilation of Works Contract Provisions under VAT Laws ofDifferent States. Compilation of works contract assumes significance astaxation of works contract has always been a challenging area for theprofessionals.

I am sure that members will find this compilation very useful in their day today practice in respect of State-Level VAT.

Date: 29th January, 2013

Place: New Delhi

CA. Jaydeep Narendra ShahPresident


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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] 9STC 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 workscontract 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 Statesand are called upon by the businesses operating in multi States. This would,

in effect, facilitate the members to practice across geographies thereby


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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 andCA. 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] queries on www.pdicai.org.

Date: 29thJanuary, 2013

Place : New Delhi.

CA. Madhukar N. Hiregange

Chairman

Indirect Taxes Committee


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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


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viii


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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 inrespect 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 contracti.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


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Compilation of Works Contract Provisionsunder VAT Laws of Different States

2

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

transaction.

As a result of the 46thAmendment 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 labourcharges, 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 workscannot be made a part of the measure for levy of tax contemplated by Article

366(29A)(b).


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Introduction

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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 valuableconsideration 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


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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 dealeris 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 dealeris 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 notentitled 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 notissue 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


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Introduction

5

Contractee- registered dealerwill also be not entitled to claim input tax credit in

respect of the goods received by way of transfer in the works contract ofmoveable 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.


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There must be dominant intention to affect the transfer of property in

goods in execution of works contract, passing of the property ingoods 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 ofthe 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.


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1.A

NDHRAPRADESH(A.P.)

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

1.

Is

works

contractdealtseparately

undertheV

ATAct?

Istherea

deemingprovisiondealing

withworkscontract?

Yes

Deemed

assaleunderthedefinition

ofsale

Section

4

(7)is

the

chargingsection

ofthe

Andhra

Pradesh

Value

AddedTaxAct,

2005(the

VATAct)

2.

Isthereanyspecificformtoapplyfor

registration

as

a

works

contractor

(WC)underVATlaw?

Noseparateregistration.

Section

17oftheVAT

Act

3.

WhetherNon-resident(dealeroutside

thestate)c

anapplyforregistrationas

workscontractor?

Thereis

nospecificregistrationfor

works

contractor.

It

is

only

registrationasaVATdealer.

4

EligibleTur

noverforregistration

`7.5

lakhs

Section

17(5)(g)ofthe

VATAct

5.

Whatare

the

deductionsthatare

allowablefr

omturnover?

Deductions

towards

labour

compone

nt

Rule17(1)(e)ofthe

Andhra

Pradesh

Value


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CompilationofWorksContractProvisionsunderVATLawsofDifferentStates

8

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

Added

TaxRules,2005

(theVA

TRules)

6.

Whetherth

eWC

hastheoptionto

claimthelabourchargesandlikeon

actualbasisoradhocbasis?

Tillthep

rojectiscompletedhecan

claimon

adhocbasisandonceitis

complete

d,

the

same

should

be

claimedonactualbasis.

Second

Proviso

under

Rule17

(1)(e)oftheVAT

Rules

7.

Howareth

elabourchargesandlike

definedund

ertheVATlaw?

No

definition

is

provided

in

the

Statute

8.

Whetherdepreciationcanbeclaimed

aslabourchargesandlike?

Ifyes,the

nwhetherinputtaxcredit

oncapitalg

oodswillbeallowable?

Statute

does

not

provide

for

deductionofdepreciationbutitis

beingallowedaspercaselaw.

Thereis

no

distinction

between

capitalg

oodsandothergoodsin

AndhraP

radesh.

9.

Candeduc

tionbeclaimedforland

valuebythecompositiondealer?

Intheca

seofbuilder,whooptedfor

composition,

taxhastobepaideven

ontheva

lueoftheland,whileselling

flatorvilla.


18/614

Andhra

Pradesh

9

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

10.

How

isth

e

estimated

grossprofit

computedincaseofworkcontract?

Also,whatistheratiotoapportionthe

gross

prof

itbetween

materialand

labour?

Generallybookprofitisadoptedfor

thepurpo

se.

11.

Whethergrossprofitsaretobeadded

toactuallabourchargesandlikeor

adhoclabourchargesandlike?

Profit

relatable

to

labour

is

deductab

le.

12.

Whetherw

ater,electricitydeposits,

stampduty

,registrationfee,service

tax,etcform

partoftheworkscontract

turnover?

Ifthesearecollectedaspartofsale

consideration,

thentaxispayableon

thesame

.

Generally,

these

are

separately

and

directly

paidbythebuyers.

13.

Iscontractorliabletotaxforfree

supplyofgoodsbycontractee?

Thecontractorisnotliabletopay

any

tax

on

the

value

ofgoods

wherein

the

contractee

supplies

goodson

freebasis.


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10

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

14.

Whatisth

etimeofsaleforworks

contractorandatwhatpointoftime

the

taxshould

be

offered

to

the

department?

Taxshouldbepaidontransferof

property

in

goods

i.e.,

on

incorpora

tion

of

goods

into

the

works.

15.

WhichSection/Scheduleprescribes

therateoftaxforworkscontract?

Tax

has

to

be

paid

on

the

incorpora

tionvalueofthegoodsat

the

rates

mentioned

in

the

Schedule

stotheActinrespectof

thegoodsenumeratedtherein.

Section

4(7)(a)(regular

Scheme

)

and

Section

.4(7)(b)&(d)

(CompositionScheme)of

theVAT

Act

Effectivefrom15.9.2

011,

the

rate

oftax

under

compositionschemeis5%

16.

WhetherW

C

willbeliabletopay

unregistere

dpurchasetaxinaddition

toworksco

ntracttax?

Thereisnosuchprovision.

Workscontractor

isliable

to

pay

output

tax,no

purchasetaxneedtobe

paid.

17.

Whatistherateoftaxfordeclared

goodsused

inthecourseofcontract?

Itis5%.

18.

Is

standa

rd

deduction

method

availablefo

rpayment?

Yes,they

areavailable

Rule17

(1)(g)oftheVAT

Rules


20/614

Andhra

Pradesh

11

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

Ifyes,whatarethevariousrates

prescribedfordifferenttypesofworks

contract?

Theyare

varyfrom15%to40%.

19.

Whetherco

ntractee/principalisliable

todeduct

TaxDeductedatSource

(TDS)from

theamountpayableto

contractor?

Yes.Contracteeisliabletodeduct

TaxDeductedatSource(TDS)/Tax

Collected

atSource(TCS)asthe

casemaybe.

Section

22(3)(TDS)and

Section

22(3A)(TCS)of

theVAT

Act

TCS

is

made

by

State

Governmentdep

artments

andLocalauthorities.

20.

Whatis

the

rate

ofTDS

to

be

deductedin

caseofworkscontract?

Whetherin

terstatesuppliesorimport

transactions

are

considered

for

deductingT

DS?

(a)Inrespectofroadworksand

cana

lliningworkstherateof

TDS

is1.4

%

and

(b)foro

thersitis2.8

%.

Adealer

canrequesttheassessing

authority

to

reduce

the

TDS

percentageiftherearetransactions

fallingun

derCentralSalesTaxAct

(CST)Ac

t,1956.

Rule18

oftheVATRules


21/614


12

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

21.

Isthecontractoralsoliabletodeduct

TDSfromtheamountpayabletothe

Sub-Contra

ctor?

ContractorcannotmakeTDSfrom

outofth

eamountspaidtothesub

contracto

r.

22.

Whetherth

eWCcanclaiminputtax

creditonco

nsumables?

Thereis

noprohibitiononclaiming

Input

Tax

Credit

(ITC)

on

consuma

bles,iftheyareusedfor

business.

23.

Whetherdeductionforsubcontractor

turnoverispermittedfromtheturnover

ofWC?

DoesWC

havetheoptiontoclaim

inputtax

credit(ITC)in

lieu

of

deductionfromtotalturnover?

Ifthesubcontractorisaregistered

VATdea

ler,themaincontractorcan

claimdeduction

on

the

contract

receipts.

Mainco

ntractorisnoteligibleto

claimanyITCinsuchsituation.

24.

Whetherinputtaxcreditisallowable

fullyincase

ofworkscontract?

Ifthecon

tractorisundercomposition

scheme,

ITCisnotallowed.


22/614

Andhra

Pradesh

13

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

25.

Isthereanyspecificformatofinvoice

orbillfor

regularandcomposition

WC?

Nospecificformat.

26.

Can

running

billbe

treated

as

invoice?

Whetheradvancesreceivedincluding

mobilization

advancewillbeliableto

tax?

Running

Account(RA)billisthe

base.

Advances

are

notliable

to

tax

because

there

is

no

transferof

property

ingoodsbutwhenadvance

isadjuste

dtaxispayable.

27.

Isitcompulsoryforthesub-contractor

tobear

egistereddealerandfile

returnsd

eclaring

the

turnover

pertainingtomaincontractor?

Yes.Suc

hconditionisthere

Section

4(7)(h)ofthe

VATAct

28.

Cansubco

ntractorclaimexemptionif

maincontra

ctorpaystax?

Ifthe

main

contractoropts

for

composition,

then

only

sub-

contracto

risnotliabletotax.


23/614


14

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

29.

Whetherco

ntractororsub-contractor

areexemp

tedincaseanyoneof

the

two

undertakes

to

discharge

VAT

liab

ility

on

the

entire

consideration?

Nosuch

provision.

Statutedoesnot

prescribe

anysuchundertaking.

30.

DoestheW

Chaveanoptiontopay

taxundercompositioncategory?

Yes,IfW

Cwants,

hecanopttopay

undercompositionscheme.

Section

4(7)(a)(Regular

Scheme)

and

Section

4(7)(b)&

(c)

(Compo

sition

Scheme)

oftheVATAct

Bydefault,taxh

astobe

paidunderregularscheme

in

case

option

for

compositionisnotavailed.

31.

IscompositionWCallowedtomake

interstate/importpurchases?

WC

can

make

import/interstate

purchase

.

32.

IscompositionWCeligibletotakesub

contractord

eductions?

Ifthesu

bcontractorispayingtax,

beinga

registeredVATdealer,the

question

ofmaincontractoropting

forcomp

ositiondoesnotarise,as

thereisn

oliabilityonhim.

However,

ifth

e

main

contractor

opts

for

composition,

then

thesub

contractortothat

extentis

notliabletotax.


24/614

Andhra

Pradesh

15

Sl.

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Particula

rs

RelevantSection/

Rule

Remarks

33.

WhetherW

C

can

optforregular

scheme

for

one

project

and

composition

scheme

for

other

project?

Compositioncanbeproject-wiseand

itisperm

itted.

34.

Isthereanyproceduretochangethe

schemefro

m

regulartocomposition

workscontractor?

Acontractorcanoptforcomposition

onlybefore

he

commences

the

executionofaparticularproject.

35.


schemefro

m

compositiontoregular

workscontractor?

Notperm

itted.

36.

Whatarethecompositionratesfor

differenttyp

esofcontracts?

(a)Forallcontractsitisonly5%.

(b)Inthecaseofbuilders,

itis

1.25

%

(i.e

5%

on25%

ofthe

grossreceipts)

37.

WhetherW

Coptingforcomposition

methodis

required

to

take

prior

permission/provideintimationtothe

department?

Onlyintim

ationinformVAT250has

to

be

filed

and

acknowledgment

needsto

beobtained.

Rule17

(2)(3)and(4)of

theVAT

Rules

FormVAT250


25/614


16

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

38.

Whether

composition

dealer

can

applyforinterstateworkscontract?

Thereis

no

connection

between

compositionunderVATActandinter

Stateworkscontract.

Inter-State

works

contracts

are

taxableu

nderCSTAct.andthereis

nocomp

ositionschemeunderCST

Act.

39.

WhethersuchWCisrequiredtofile

monthly/qu

arterlyreturn?

Whatisth

eduedateoffilingthe

return?

Monthlyreturn

Ithastobefiledbythe20th

of

succeedingmonth.

Section

22oftheVATAct

40.

WhetherAnnualReturnisfiledbythe

workscontractor?

Thereisnosuchannualreturn.

41.

Whatisthe

timelimitforAssessment

incaseofw

orkscontractor?

Schemeisselfassessmentbasis.

However,thede

partment

hastimeforfour

yearsto

makeassessment.


26/614

Andhra

Pradesh

17

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

42.

WhetherV

AT

Auditprovisions,if

applicable

undertheStateVATlaw,

applytoWC

aswell?

Ifyes,whatistheturnoverlimitfor

suchaudit?

Thereis

no

mandatory

auditby

eitherSa

lesTaxPractioner(STP)or

Chartered

Accountant

(CA)

in

AndhraP

radesh.

Ontheir

ownofficersconductaudit

periodica

lly.

43.

WhetherVATisapplicableonsaleof

flatsbythe

developerpertainingtothe

shareofd

evelopedareaincaseof

constructioncontracts?

Ontheg

rossconsiderationreceived

orreceivableforthesaleofflat/villa/

complex

includinglandvalue,

the

builderis

[email protected]

5%

Section

4(7)(d)ofthe

VATAct

Itiscompositions

cheme.

44.

Istherearequirementtofilethecopy

ofcontract/agreementswith

the

department?

Asandw

hendemanded,

itmustbe

filed.


27/614

2.

ARUNACHALPRADESH

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

1.

Is

works


undertheV

ATAct?

Istherea


withworkscontract?

Workscontracthasbeendealtwith

separately

under

the

Arunachal

Pradesh

GoodsTaxAct,

2005(the

VATAct)underSection5(2)ofthe

VATAct.

AsperSection2(zq)ofthesaidAct,

Works

Contractincludes

any

agreementforcarryingoutforcash

orfordeferred

paymentorfor

valuable

consideration,

thebuilding

construction,

manufacture,

processing,

fabrication,

erection,

installatio

n,

fittingout,improvement,

repairo

rcommissioning

ofany

movable

orimmovable

property.

Section

2(zq)

and

2(zf)(v)oftheVATAct.


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19

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rs

RelevantSection/

Rule

Remarks

Alsothe

reisamentionofsale

including

thetransferofpropertyin

goods(w

hetherasgoodsorinsome

otherform)involvedintheexecution

of

a

works

contract

under

Section2

(zf)(v)oftheVATAct.

2.


registration

as

a

works

contractor

(WC)underVATlaw?

There

is

no

specific

form

of

applicatio

nforregistrationasworks

contracto

r.Theworkscontractorhas

to

apply

in

the

generalform

of

registration

i.e.,

Form

RF-01,

RF-02,RF-03,

RU-01,

RN-02

as

applicableindifferentcases.

Onlyfo

r

road

transporter

and

warehouseapprovalseparateforms

arethere

viz,FormTR-01andForm

WA-01re

spectively.

Section

20,

21,

22ofthe

VAT

Act

read

with

Rule15

,16,

17,

18,

21,

22

of

the

Arunachal

Pradesh

Goods

Tax

Rules,

2005.

(the

VAT

Rules)


29/614


20

Sl.

No.

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Particula

rs

RelevantSection/

Rule

Remarks

3.

Whether

Non-

resident

(dealer

outsidethe

state)can

apply

for

registration

asworkscontractor?

Yes.

4.

EligibleTur

noverforregistration.

`

5lacs

istheTaxableQuantumas

perVATAct.

Section

19(2)oftheVAT

Act

5.

Whatare

the

deductionsthatare

allowablefr

omturnover?

Fordete

rmination

ofthe

taxable

turnover,

thefollowingdeductions

areallow

edinrespectoftheamount

ofthech

argestowardsgoodswhen

goodsareascertainable(incaseof

workscontract):

(a)theturnoverofsalesnotsubject

tota

xunderSection

7ofthe

VAT

Act;

(b)chargestowardslabour,service

and

other

like

charges

Section

5,

6and7ofthe

VATActandRule5of

theVAT

Rules.


30/614

ArunachalPradesh

21

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

prescribedinRule5oftheVAT

Rule

s;

(c)theturnoverofsalesofgoods

declaredexemptunderSection

6oftheVATAct.

6.

Whetherth

eWC

hastheoptionto



Works

contractorcan

claim

the

deduction

for

labour

and

like

charges

on

actualbasis

ifthe

amounts

ofchargestowardsgoods

are

ascertainable;

When

unascertainable,

the

works

contracto

rshallpaytaxonthesale

priceafter

deducting

a

certain

percentageasperRules.

Section

5(2)oftheVAT

ActreadwithRule5of

theVAT

Rules.

7.

Howareth


definedund

ertheVATlaw?

The

cha

rges

towards

labourand

services

andotherlikechargesshall

include:

(a)Labourchargesforexecutionof

Rule5

(2)ofthe

VAT

Rules.


31/614


22

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

works;

(b)Charges

for

planning

and

architectsfees;

(c)Chargesforobtainingonhireor

other

wise

machineryand

tools

used

forthe

executionofthe

workscontract;

(d)Cost

ofconsumablessuchas

water,electricity,

fuel,etc.usedin

the

execution

of

the

works

contractthepropertyinwhichis

nottransferredinthecourseof

executionofaworkscontracts;

(e)Cost

ofestablishmentofthe

contractorto

the

extentitis

relata

bletosupplyoflabourand

services;

(f)

Othersimilarexpensesrelatable


32/614

ArunachalPradesh

23

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

tosupplyoflabourandservices;

(g)Profitsearnedbythecontractorto

thee

xtentitisrelatabletosupply

oflabourandservicessubjectto

furnis

hingofaprofitandloss

accountoftheworkssites.

Provided

where

amount

of

charges

towards

labour

and

service

are

notascertainable

from

theaccountsofthedealer,

thea

mountofsuchchargesshall

becalculatedatthepercentages

aspe

rRules.

8.



Ifyes,then

whetherinputtaxcrediton

Deprecia

tion

onmachinery

and

toolsuse

dintheexecutionofworks

contractisnotallowedaslabourand

likechargesasthereisnosuch

inclusion

inRule5(2).

Rule5

(2)ofthe

VAT

Rules;

Section

9(1)

and

Section

3(impositionof

tax)oftheVATAct.

No

separate

Section

definingthetax

creditin

caseofworkscon

tract.


33/614


24

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

capitalgoodswillbeallowable?

However,underRule5(2)oftheVAT

Ruleschargesforobtainingonhire

or

otherwisemachinery

and

toolsuse

d

for

the

execution

of

theworkscontractareallowed.

If

acontractor

uses

his

own

machineryandtoolsintheexecution

of

awo

rks

contract,

which

he

otherwise

could

have

hired

from

outside,

thendepreciationjustlike

hirechar

gesonsuchmachineryand

toolssho

uldbeallowed.

AsperSection

9(1),everygoods

imported

orpurchasedwhichare

useddirectlyorindirectlybythe

dealerforthepurposeofmaking

Section

15oftheVAT

Act.


34/614

ArunachalPradesh

25

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No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

salewhichareliabletotaxunder

section3

oftheAct;andwhichare

notliable

totaxundersection7are

entitledtocredit.Hence,

inputtax

crediton

capitalgoods

is

also

allowable

.However,Section

15(1),

(2),(3)

states

thatin

case

of

treatmentofstockbroughtforward

duringtransition,noinputtaxcredit

forfinishedgoodsorcapitalgoodsis

allowed.

However,

under

simplified

accounting

method

no

inputtax

creditisavailable.

9.

Candeduc

tionbeclaimedforland

valuebythecompositiondealer?

Deductionforthevalueoflandis

allowable

in

the

hands

of

a

simplified

accountingmethoddealer.


35/614


26

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

However,

itisnotwrittenspecifically

ineithertheActortheRules.

10.

How

isth

e

estimated

grossprofit

computedincaseofworkcontract?

Also,whatistheratiotoapportionthe

gross

prof

itbetween

materialand

labour?

There

is

no

specific

rule

for

estimatio

nofgrossprofitincaseof

worksco

ntractorfordetermination

ofthe

ratio

ofapportionmentof

grosspr

ofitbetweenmaterialand

labour.Such

estimation

may

be

madeon

thebasisofcostincurred

forvario

us

components

and

the

valueof

theworkscontracttobe

executed

.

11.

Whethergrossprofitsaretobeadded

toactuallabourchargesandlikeor

adhoclabourchargesandlike?

Profitearnedbythecontractortothe

extentit

isrelatabletosupplyof

labour

and

services

will

be

deductiblefromtheturnoversubject

tofurnishingoftheprofitandloss

Rule5(2)(g)ofthethe

VATRu

les.


36/614

ArunachalPradesh

27

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

accountoftheworkssites.

12.

Whetherw

ater,electricitydeposits,

stampduty

,registrationfee,service

tax,etcform

partoftheworkscontract

turnover?

Fordeterminationoftaxpayableby

thedeale

rfollowingdeductionsfrom

taxableturnoverareallowedunder

Rule5(2

)oftheVATRules:

(a)labou

rchargesforexecutionof

workscontract;

(b)charg

esforplanning,

designing

andarchitectsfees;

(c)charg

esforobtainingonhireor

otherwisemachineryandtoolsused

forthe

execution

ofthe

works

contract;

(d)cost

ofconsumablessuchas

water,electricity,

fueletc.usedin

theexecutionofworkscontract,

the

property

inwhichisnottransferred

inthecourseofexecutionofthe

Rule5

(2)ofthe

VAT

Rules.


37/614


28

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

workscontract;

(e)cost


contracto

rtotheextentitisrelatable

tosupplyoflabourandservices;

and

(f)Other

similarexpensesrelatable

tosupply

oflabourandservices.

(g)profitsearnedbythecontractor

totheex

tentitisrelatabletosupply

oflabourandservicessubjectto

furnishing

ofa

profitand

loss

accountoftheworkssites;

Deductionsinrespectofstampduty,

registrationfee,andservicetaxare

not

ava

ilable

from

the

taxable

turnover

undertheVAT

Actand

rules.


38/614

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29

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

13.

Iscontractorliabletotaxforfree

supplyofgoodsbycontractee?

Inthecaseoffreesupply,

theworks

contracto

risnotliabletotax.

Further,

wherematerialhasbeen

supplied

byprincipalandthecostof

suchgoodshasbeendeductedby

the

prin

cipal

from

the

amount

payabletothecontractor,deduction

isnotallo

wedandistaxable.

14.

Whatisth

etimeofsaleforworks

contractorandatwhatpointoftime

the

taxshould

be

offered

to

the

department?

Thenettaxofadealershallbepaid

within28

daysoftheconclusionof

thedeale

rstaxperiod.

Explanation:Thenettaxofadealer

shallbe

paidatthesametimeas

furnishingareturn,

buttheobligation

topayarisesbyvirtueoftheabove

provision

andisnotdependenton

furnishingareturn,norontheissue

Section

3(4)oftheVAT

Act.


39/614


30

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

ofanoticeofassessmenttothe

dealer.

15.

WhichSection

/Scheduleprescribe

therateoftaxforworkscontract?

Section4(1)oftheVATActdeals

withthe

rateoftaxunderworks

contract.

Section5(2)oftheVATActwillbe

applicableforthedeterminationof

taxable

turnoverarising

from

the

executionoftheWorksContract.

Section

17oftheVATActand

Rule12(10)and(11)oftheVAT

Rulesde

alswiththerateoftaxand

laysdow

ntheconditionsregarding

simplified

accounting

methods

applicabletoworkscontract.

Section

4,

5and17of

theVAT

Act;

Forthe

works

contract

method,

Rule12ofthe

VATRu

lestobereferred.

16.

WhetherW

C

willbeliabletopay

unregistere

dpurchasetaxinaddition

toworksco

ntracttax?

Yes,as

no

inputtax

creditis

allowable

forpurchase

ofgoods

from

u

nregistered

dealer

as

Section

9(2)&(7)ofthe

VATAct.


40/614

ArunachalPradesh

31

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

mentione

dinSection

9(2)&(7)of

theVATAct.

However,

incaseofpurchaseof

second

hand

goods

from

unregiste

reddealer,thecreditwill

onlybe

allowedifaninvoiceor

receiptsigned

by

such

resident

seller(w

ho

is

notregistered)is

produced

.The

contents

ofthe

invoiceare:

(a)

the

natureofthegoods;

(b)

the

amountpaidforthegoods;

(c)

the

nameoftheseller;

(d)

the

sellers

address

in

ArunachalPradesh;and

(e)

The

originalinvoiceseparately

indicatingthetaxcomponent.

[Rule10]

Rule1

0

of

the

VAT

Rules.


41/614


32

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rs

RelevantSection/

Rule

Remarks

17.

Whatistherateoftaxfordeclared

goodsused

inthecourseofcontract?

Rateoftaxfordeclaredgoodsused

inthecourseofcontractis4%.

18.

Is

standa

rd

deduction

method

availablefo

rpayment?

Ifyes,whatarethevariousrates

prescribedfordifferenttypesofworks

contract?

Standard

deductionisavailablefor

eachtyp

eofworkscontractwhere

thedealerdoesnotmaintainbooks

ofaccounts

foridentification

of

labourchargeswhichismentioned

inAnnexure8.

Rule30(2)oftheVAT

Rules

19.

Whetherco

ntractee/principalisliable

to

deduct

TDS

from

the

amount

payabletocontractor?

Itisfor

generalinformationtoall

concerne

d

thattax

deduction

at

source(TDS)forVAT

hasbeen

introduce

dw.e.f.

11thA

pril2007by

making

an

amendment

in

the

ArunachalPradeshGoodsTaxAct,

2005.

Anytaxdeductedshallbepaidinto

theGovernmentaccountonbehalf

Circular

No.-07

dated

22ndSe

ptember,2009


42/614

ArunachalPradesh

33

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No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

ofthepe

rsonfromwhosebillsand

invoice

the

deduction

has

been

madean

dsameshallbedeposited

byChalla

nNoFF-08underHeadof

Account

0040.Thepersonmaking

anydeductionoftaxatsourceand

paying

it

into

the

Government

account

shallissuetothepayee

intimation/

certificate

of

tax

deductionatsourceandpayment.

20.

Whatis

the

rate

ofTDS

to

be

deductedin

caseofworkscontract?

Whetherin

terstatesuppliesorimport

transactions

are

considered

for

deductingT

DS?

Notspe

cified

in

the

Arunachal

Pradesh

GoodsTaxAct,

2005and

Arunachal

Pradesh

Goods

Tax

Rules,20

05.


43/614


34

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

21.

Isthecontractoralsoliabletodeduct

TDSfromtheamountpayabletothe

Sub-Contra

ctor?

Pointno.

31

22.

Whetherth

eWCcanclaiminputtax

creditonco

nsumables?

Although

nospecificprovisionfor

allowing

input

tax

credit

on

consuma

blesexistsunderthelaw,

it

isassum

edthatinputtaxcreditis

allowable

forconsumables.

Section9(1)oftheVATActgives

importancetotheuseofgoodsfor

thepurposeofmakingsaleandnot

thekinds

ofgoods.

Further,Section9(2)oftheVATAct

doesnotincludeconsumablesas

disallowe

d.

Section

9(1)&9(2)ofthe

VATAct.


44/614

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35

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Particulars

Particula

rs

RelevantSection/

Rule

Remarks

23.

Whetherdeductionforsubcontractor

turnoverispermittedfromtheturnover

ofWC?

DoesWC

havetheoptiontoclaim

inputtaxc

reditinlieuofdeduction

fromtotaltu

rnover?

Theworkscontractorisentitledto

claimde

ductiontowardsamounts

paidto

the

sub-contractors

for

execution

ofthe

works

contract

subjecttoproductionofprooftothe

satisfaction

ofthe

Commissioner

that:

(a)the

sub-contractor

is

a

regis

tereddealerliabletopay

taxundertheVATAct;and

(b)dedu

ctioncanbeclaimedonthe

stren

gthofaninvoiceraisedby

thesubcontractor

(c)Thereisnofurthertransferof

good

sinanyform

bythesub

contr

actor

to

the

works

contr

actorexceptasshownin

thein

voiceofthesubcontractor.


45/614


36

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No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

Nospecificprovisionassuchgiven

intheActorRules.

Thereis

noexpressprovisionunder

theVAT

Actforallowinginputtax

credit

on

payments

to

sub

contracto

r.

24.

Whetherinputtaxcreditisallowable

fullyincase

ofworkscontract?

Inputtax

creditisallowableinfullto

theexte

nttaxhasbeenpaidor

payable

on

purchase

oftaxable

goodsfrom

a

registered

dealer

whensuchgoodsarepurchasedfor

use

in

the

execution

ofworks

contract.

Section

9(1)

and

Section

9(2)(a)ofthe

VATAct.

25.

Isthereanyspecificformatofinvoice

orbillfor

regularandcomposition

WC?

No

spe

cific

format

has

been

prescribe

dforinvoiceorbill.

However,

following

information

is

compulsorilyincludibleintheinvoice

Section

51oftheVAT

Act.


46/614

ArunachalPradesh

37

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

orbill:

A)The

taxinvoiceissuedunder

Section

51(2)shallcontain

the

following

particularsontheoriginal

aswellascopiesthereof:

(a)the

wordsTaxInvoiceina

prom

inentplace;

(b)the

name,

address

and

regis

tration

number

of

the

sellin

gregistereddealer;

(c)thenameandaddressofthe

purchaser;

(d)anin

dividualpre-printednumber

and

thedateonwhichthetax

invoiceisissued;

(e)description,

quantity,

volume

and

value

of

goods

sold

andservicesprovidedandthe


47/614


38

Sl.

No.

Particulars

Particula

rs

RelevantSection/

Rule

Remarks

amountoftaxchargedthereon

indicatedseparately;

(f)the

signature

ofthe

selling

deale

rorhisservant,manager

ora

gent,dulyauthorized

by

him;and

(g)The

nameandaddressofthe

printerandfirstandlastserial

numberoftaxinvoicesprinted

and

supplied

by

him

to

the

deale

r.

A

dea

ler

following

simplified

accountingmethod,

however,shall

notbe

entitled

to

issue

anytax

invoice.

B)Theretailinvoiceissuedunder

Section

51(4)shallcontain

the


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following

particularsontheoriginal

aswellascopiesthereof:

(a)the

words

'RetailInvoice'or

'CashMemorandum'or'Bill'ina

prom

inentplace;

(b)the

name,

address

and

regis

trationnumberoftheselling

deale

r;

(c)inca

sethesaleisinthecourse

ofinter-statetradeorcommerce,

thename,registrationnumber

and

addressofthepurchasing

deale

randtypeofstatutoryform,

ifany

,againstwhichthesalehas

been

made;

(d)anindividualserializednumber

andthedateonwhichtheretail

invoiceisissued;


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(e)description,quantity,volumeand

value

ofgoodssoldandservices

provided,

inclusiveofamountof

taxchargedthereon;and

(f)The

signature

ofthe

selling

deale

rorhisservant,manager

orag

ent,dulyauthorizedbyhim.

26.

Can

running

billbe

treated

as

invoice?

Whetheradvancesreceivedincluding

mobilization

advancewillbeliableto

tax?

Yes.Run

ningbillcanbetreatedas

invoice.

Advance

taken

prior

to

commencementoftheexecutionof

workscontractisnotliabletoVAT.

27.

Isitcompulsoryforthesub-contractor

tobear

egistereddealerandfile

returnsd

eclaring

the

turnover

Asdiscu

ssedunder23above,no

deductionshallbeadmissibleunless

thesub

contractorisaregistered

Section

9(2)oftheVAT

Act


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Rule

Remarks

pertainingtomaincontractor?

dealerundertheVATActwhohas

filedthereturndisclosingthereinthe

turnover

ofsalesattributabletothe

workscontractor.

Thisisa

lsoclearfromSection9(2)

oftheActwhichstatesthatnotax

creditshallbeallowedinthecaseof

thepurchaseofgoods,forgoods

purchase

dfromapersonwhoisnot

aregistereddealer.

28.

Cansubco

ntractorclaimexemptionif

maincontra

ctorpaystax?

Notspe

cified

in

the

Arunachal

Pradesh

GoodsTaxAct,

2005and

Arunachal

Pradesh

Goods

Tax

Rules,20

05.

29.

Whetherco

ntractororsub-contractor

areexemptedincaseanyoneofthe

two

undertakesto

discharge

VAT

liabilityontheentireconsideration?

Contractorisliabletopaythetax.

However,

deductionisavailablefor

payments

to

sub

contractoras

mentione

dinpointNo.

23.


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Remarks

30.

DoestheW

Chaveanoptiontopay

taxundercompositioncategory?

Apartfro

m

theregularscheme,a

works

contractor

may

opt

for

simplified

accounting

methods

undersection17oftheVATActand

paytaxs

ubjecttocertainconditions

(onlyif

the

contractorfulfillsthe

condition

s

mentioned

in

Section

17(3)oftheVATActand

Rule11(1)oftheVATRules.).

AsmentionedinRule12thereare

namely

foursimplifiedaccounting

methods:sample

method,stock

purchase

method,

businessnorms

methoda

ndworkscontractmethod.

Section

17oftheVAT

Actread

withRule11and

12oftheVATRules.


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Remarks

WorksContract(Rule12(10)&(11)):

Thenettaxofadealerelectingtouse

theworkscontractmethodforatax

periodis:

NetTax=tftc

where

tf=theo

utputtaxdeterminedataflat

rate

undersub-rule(11).

tc=the

totalamountoftaxcredits

allow

ableunderthisActforthe

taxp

eriod.

Aworkscontractormaydeterminethe

outputta

xataflatrateof10%

(4%

vide

Notification

No.

TAX-

28/2002/VOL-IIdated31st

August

2009)o

n

the

turnoverofworks

contract

afterdeducting

therefrom

charges

towardslabourandservice


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Remarks

andotherlikechargesinaccordance

withrule

5,

irrespectiveofthegoods

thatmay

beapportionedintheworks

contract.

31.

IscompositionWCallowedtomake

interstate/importpurchases?

Yes.Workscontractdealerpursuing

thesimplifiedaccountingmethodis

permitted

to

importgoods

from

outsidetheState,providedtheWC

dealer

satisfies

the

conditions

mentione

dinSection17(3)ofthe

VATAct.

Section

17(3)oftheVAT

Act.

32.

IscompositionWCeligibletotakesub

contractord

eductions?

Thereis

nocompositionschemeas

pertheA

ct.

However,a

simplified

accounting

method

maybe

adopted

bythe

worksco

ntractorwheredeductions

oflabour

andserviceandotherlike

Rule12

(10)&(11)ofthe

VATRu

les.


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Rule

Remarks

charges

are

allowed.

Also,

tax

credits

are

allowed

unlike

the

compositionschemeofotherStates.

[Rule12(10)&(11)]

33.

WhetherW

C

can

optforregular

scheme

for

one

project

and

compositionschemeforotherproject?

Thereisnoenablingprovisioninthe

VATAct

forexercisingsuchoption

onprojec

ttoprojectbasis.

Holding

one

registration

number

bothoptionscannotbeavailedat

thesametime.

Onceasimplified

accountingmethodisoptedbythe

WC,

heshallcontinuetoapplythat

samesim

plifiedaccountingmethod

foratleastthenext12months.

Rule11

(2)(b)oftheVAT

Rules.

34.


schemefro

m

regulartocomposition

workscontractor?

A

deale

rcan

go

forsimplified

accountingmethodonlywhenhe

satisfiestheconditionsmentionedin

Section

17(3)oftheVATActand

Section

17oftheVATAct

readwithRule11ofthe

VATRu

les.


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rs

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Rule

Remarks

Rule11(1)&(5)oftheVATRules.

A

pers

on

who

satisfies

the

condition

smayelecttoemployany

one

of

the

simplified

accounting

methods.

Theelectionshalltake

effectfromthebeginningofthenext

tax

period

and

the

dealershall

continue

to

apply

that

same

SimplifiedAccountingMethodforat

leastthe

next12

months.The

makingoftheelectiontousea

simplified

accountingmethodshall

benotifiedtotheCommissionerin

FF-04.

35.


schemefro

m

compositiontoregular

workscontractor?

Asper

Rule11(4),anelectionto

employ

a

simplified

accounting

methodshallceasetohaveeffect

fromthe

startofthenexttaxperiod

ifthedealerceasestobeeligibleto

Rule11(4)oftheVAT

Rules.


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Rule

Remarks

use

an

y

simplified

accounting

method

orifthedealerelectsto

cease

applying

the

simplified

accountingmethodbynotifyingto

thecomm

issionerinFormFF-05

36.

Whatarethecompositionratesfor

differenttyp

esofcontracts?

simplified

accountingmethodrate

forworkscontractis10%

(4%vide

Notificatio

nNo.TAX-28/2002/VOL-II

dated31stA

ugust2009)

Rule11

&12oftheVAT

Rules.

37.

WhetherW

Coptingforcomposition

methodis

required

to

take

prior

permission/provideintimationtothe

department?

The

works

contractoropting

for

simplified

accountingmethodshall

havetonotifytheCommissionerin

FormFF-04.

Rule11(3)oftheVAT

Rules.

38.

Whether

composition

dealer

can

applyforinterstateworkscontract?

No.


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Rule

Remarks

39.

WhethersuchWCisrequiredtofile

monthly/quarterlyreturn?

Whatisth

eduedateoffilingthe

return?

AsperR

ule34(1),taxperiodfora

dealer

whose

turnover

exceeds

`

1crore,shallbe

1

month.

Otherwise,

itisattheoptionofthe

dealer,either1monthoraquarterin

FormFF-01,

02,

03,

06,

07,

08and

09asapplicable.

Similartothetaxperiodreturnsare

filedviz.,

monthlyorquarterly.

Duedate

forfilingthereturn:

i)Dealersperiodicreturns:Areturn

inFormFF-01isduewithin28days

fromthe

endofthetaxperiod.

[Rule

36(2)]

ii)

Impo

rters

return-cum-challan:

ThereturninForm

FF-07shallbe

furnished

atthetimethattheentry

Section

28oftheVAT

ActreadwithRule34of

theVAT

Rules.

Rule36

,37,

38,

39,

40of

theVAT

Rules.


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Rule

Remarks

taxisdueorpaid.

[Rule37(2)]

iii)Excep

tionreturns:Asspecified,a

returnin

Form

FF-02shallbedue

within7

daysoftheoccurrenceof

theeventtriggeringtheobligationto

paythea

mountdue.

[Rule38(2)]

iv)Other

returns:Thereturnshallbe

filedwith

inthetimespecifiedinthe

notice,w

hichshallnotbeearlier

than28

daysfrom

thedatethe

noticeisservedontheperson.

[Rule

39(3)]

v)RevisedReturn:Arevisedreturn

inFormFF-03shallbeduefromthe

person

within

30

days

of

his

detecting

theerror.[Rule40(2)]


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Remarks

40.

WhetherAnnualReturnisfiledbythe

workscontractor?

Onlyqua

rterly/monthlyreturnhasto

befiledbytheworkscontractoras

applicable.

Section

28oftheActread

withRu

le34,

35and36

oftheR

ules.

41.

Whatisthe

timelimitforAssessment

incaseofw

orkscontractor?

Unless

the

Commissioner

has

reasontobelievethattaxwasnot

paidbyreasonoffraudorevasion

on

the

partofthe

person,no

assessmentorre-assessmentshall

bemade

bytheCommissionerafter

theexpiryof4yearsfrom

(a)the

date

that

the

person

furnishedareturnundersection

28;o

r

(b)The

date

on

which

the

Commissioner

made

an

assessmentoftaxforthetax

perio

dorinrespectoftheimport

Section

36oftheVAT

Act.


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Remarks

ofgo

ods,whicheveristheearlier

Further,

the

commissioner

may

makean

assessmentoftaxwithin

1yearafterthedateofanydecision

oftheA

ppellateTribunalorcourt

wheretheassessmentisrequiredto

bemade

inconsequenceof,orto

give

effectto,a

decision

ofthe

appellate

tribunalorcourtwhich

requires

there-assessmentofthe

person.

42.

WhetherV

AT

Auditprovisions,if

applicable

undertheStateVATlaw,

applytoWC

aswell?

Ifyes,whatistheturnoverlimitfor

suchaudit?

YesVAT

auditprovisionsapplyto

WCalso.

Ifinany

particularyear,thegross

turnover

of

a

dealer

exceeds

`50lacs

orsuchotheramountas

Section

50oftheVATAct

readwithRule57ofthe

saidVA

TRules.Section

59(1)of

theVATAct


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RelevantSection/

Rule

Remarks

maybep

rescribed,

thensuchdealer

shallget

hisaccountsinrespectof

suchyea

rauditedbyanaccountant

within6monthsfromtheendofthat

yearand

obtainwithinthatperioda

reportof

suchauditinForm

FF-10

dulysignedandverified.

Further,

as

perSection

59,

the

commissionermayserve

on

any

person,a

noticeinforminghimtoget

hisaccou

ntsaudited.

43.

WhetherVATisapplicableonsaleof

flatsbythe

developerpertainingtothe

shareofd

evelopedareaincaseof

constructioncontracts?

Saleof

flats

by

the

developer

pertainingtotheshareofdeveloped

areain

case

of

construction

contracts

isatypeofworkscontract

andhence,

VATisapplicable.

But,

nospecificprovisionisgiveninthe

ActorRu

les.


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Rule

Remarks

44.

Istherearequirementtofilethecopy

ofcontract/agreementswith

the

department?

Thereis

norequirementtofilewith

the

departmentcopyofcontract/

agreement.

However,

during

the

assessment

proceedings

the

said

documents

mayha

ve

to

be

produced

on

demandbytheassessingauthority.


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Sl.

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RelevantSection/

Rule

Remarks

1.

Is

works


undertheV

ATAct?

Istherea


withworkscontract?

Workscontracthasbeendealtwith

separatelyundertheAssam

Value

AddedTaxAct,

2003(theVATAct)

underSe

ction69ofthesaidAct.

InAssam

,"workscontract"includes

anyagre

ementforcarryingoutfor

cash,

deferred

paymentorother

payment

or

other

valuable

consideration,

the

building,

construction,

fabrication,

erection,

installatio

n,

fittingout,improvement,

modification,

repair

or

commissioningofanymovableor

immovab

leproperty;[Section2(57)].

Section

2(57),69ofthe

VAT

Act

read

with

Rule10

,39oftheAssam

ValueA

ddedTaxRules,

2005(th

eVATRules)

2.


registration

as

a

works

contractor

There

is

no

specific

form

of

applicatio

nforregistrationasworks

Section

11readwithRule

10and

Rule39ofthe


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Remarks

(WC)underVATlaw?

contracto

r.

Thework

scontractorhastoapplyin

thegene

ralformofregistrationi.e.,

Form2a

longwithPartI/II.

saidRules.

3.

Whether

Non-

resident

(dealer

outsidethe

state)can

apply

for

registration

asworkscontractor?

Yes.

4.

EligibleTur

noverforregistration.

Whois

an

importer

:

Nil

Who

is

engagedin

anybusines

s

:

`2,0

0,0

00

Section

11oftheVAT

ActreadwithRule10of

theVAT

Rules

5.

Whatare

the

deductionsthatare

allowablefr

omturnover?

Forthe

purposeofclause(c)of

Section

11,

thevalueofthegoods

Rule1

0

of

the

VAT

Rules.


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RelevantSection/

Rule

Remarks

atthetim

eofthetransferofproperty

inthegoods(whetherasgoodsorin

someotherform)involvedinthe

executionofaworkscontractmay

be

dete

rmined

by

effecting

the

following

deductionsfromthevalue

oftheentirecontract,

insofarasthe

amounts

relatingtothedeductions

pertainto

thesaidworkscontract:

(a)labourchargesforexecutionof

thew

orks;

(b)amountspaidbywayofpricefor

theentiresub-contracttosub-

contractors;

(c)chargesforplanning,

designing

andarchitectsfees;

(d)chargesforobtainingonhireor

otherwise,machineryandtools


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Rule

Remarks

used

fortheexecutionofthe

workscontract;

(e)cost

ofconsumablessuchas

water,electricity,

fueletc.used

inth

eexecutionoftheworks

contract,

thepropertyinwhichis

nottransferredinthecourseof

executionoftheworkscontract;

(f)

cost


contractortotheextentitis

relatabletothesupplyoflabour

andservices;

(g)othersimilarexpensesrelatable

tothe

supplyoflabourand

services;and

(h)Profitearnedbythecontractor

totheextentitisrelatabletothe

supp

lyoflabourandservices.


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Remarks

6.

Whetherth

eWC

hastheoptionto



Works

contractorcan

claim

the

deductionforlabourandlikecharges

onactualbasis;otherwisetheworks

contracto

rshallpaythetaxonthe

basisoftheScheduleVIoftheAct.

Section

11(c)alongwith

ScheduleVIoftheVAT

Act.

7.

Howareth


definedund

ertheVATlaw?

Sameas

point5above

8.



Ifyes,then

whetherinputtaxcrediton

capitalgoodswillbeallowable?

Deprecia

tion

onmachinery

and

toolsuse

dintheexecutionofworks

contractisnotallowedaslabourand

like

ch

arges.

However,

Compilation of Works Contract Provisions Under VAT Laws of Different States 2

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Transcript of Compilation of Works Contract Provisions Under VAT Laws of Different States 2