In the sale of goods, the things produced or manufactured as a whole is absolute property of maker when it comes into existence and then he transfers it to the buyer. In works contract, the things produced as a whole is never absolute property of maker. Even though material used in works contract might hav been his absolute property. The article produced as a whole directly becomes property of buyer without first becoming property of maker. The contract is primarily, the contract of work, labour and materials are supplied in execution of such contract.
In a WCT, the tax is goods involved in execution of works contract and not on works contract as such. Say in construction, ABC builders and promoters have given the contract of building to Mr. A, then has to charge ABC builders WCT on the material involved in const. on which VAT is payable, ie cement, steel,sand etc. This means all the purchases have to be vattable.
All works contract are not taxable.