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work contract taxation in Karnataka VAT


Pl. anybody clarify the following points under Karnataka Value Added Tax in respect of composition works contract.

1. My client is a KPTCL electrical works contractor and in composition scheme.

2. KPTCL  is deducting tax on  labour portion only and no TDS on material portion, whether this is correct and who has to pay tax on material portion. 

3. my client is registered under CST act and purchasing goods from outside against C Form.  The problem is my is client is quoating the rate for the material ex. Rs. 500000/-.  The invoice value of the material purchased from outside Rs. 350000/-.  The KPTCL is issuing C Form for Rs. 500000/-.  What about taxation in respect of difference amount. ie., Rs. 150000/- since KPTCL is not making TDS on material amount.  For which amount my client has to issue C Form to the supplier. 

3. Pl guide me in this regard and tell me any books on taxation of works contract under KVAT.

Thaks.

 

 
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Practising Chartered Accountant

Ms.Sreelalitha,  VAT/WCT is on materials only which is a thumb rule.  This tax liability in either way you discharge (by TDS or by Cash/Cheque), it should be on the value of materials transferred in execution of works contract.   Apparently, you may observe that labour and services etc., wherein no materials are involved, are given exemption under any State VAT Act.  Thus, you may further find that consumables which are consumed in the process of execution of works contract and not transferred to the Client are not exigible to WCT/VAT.  Of course, all these are applicable under non-composition scheme.  In your case, it is composition wherein VAT/WCT is payable at the prescribed rate of tax on the total gross amount of contract.  Now, please note that:

1)  Client is supposed to made VAT TDS on gross at the prescribed % of rate since you are in composition and he is not supposed to made TDS on the labour amount which is not exigible to VAT/WCT.
2) Since you are under compostion scheme, in addition the above VAT/WCT at the prescribed rate of tax, you are liable to discharge the VAT liability on the purchase of materials from outside Karnataka and used in execution of works contract.  This additional liability shall be calculated as follows:
  a)  If such goods fall under 4% category schedule of KVAT Act, you will not have any further liability.
b)  If such goods fall under 12.5% category schedule of KVAT Act, you will have to discharge VAT / WCT @ 8.5% (12.5% - 4%).

Hope I made clear your query. If any futher clarity is needed, please feel free to contact me at CVSURYAM @ REDIFFMAIL.COM.

 

 
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Dear Madam / Sir

I would like to add some more points in this regard as under:

For composite dealers executing works contract as per notification No.FD 116 CSL 2006(13), Bangalore, dated 31-3-2006 the rate of tax payable is 4% on the total consideration for the works contract executed.

 

From 1-4-2006 section 15 [composite dealers] has been amemded to permit the composite dealers to purchase goods from interstate subjection condition that, such dealers should pay tax under section 4 [i.e., if such goods falling under the rate of 4% should pay at 4% or if such goods falling under the rate of 12.5% should pay at 12.5% under the KVAT Act,]  this tax should be payable on the value of interstate purchases without adding profit

For the balance turnover [i.e., total consideration - interstate purchases] at the rate of 4%.

If you are executing a works contract for Govt. Company, as per section 9-A, TDS is applicable.  Govt. Company has to deduct the tax at source and remit to the Department.  Tax to be deductible under this section is equal to the tax payable by you.

in this situation you need to compute an hypothetical if actual not possible example working out the approximate tax payable on payments receivable by you.

based on this i would like to conclude here that, the question of bifurcation of material and labour does not arises for the purpose of TDS.  It depends on your working to be given to your customer.

 
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Thank you Sri. Suryam and  Sri. Vasanth Kumar J.

Pl . let me knwo the service tax liability on Electrical works contract.

Regards.

 

 

 
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(Guest)

PLEASE TELL ME WORKS CONTRACT TAX ON EXECUTION OF WORKS CONTRACT  i.e DEVELOPMENT OF LAND,BUILDING ETC

 
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(Guest)

i want to know that what is the rate of wct in karnatka regarding interior, electrical work in Gulberga place

 
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is Compotion tax is service tax or VAt we cant take this credit if bill from karnataka

 
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Please guide anybody about COT its applicable in Which industry. Becoz i am working in one service industry we are taking the contract to service for the Fire Fighting  Vehicles. In India We have around 4 to 5 Airports Contract. Now we are raising the service bills only .This is  right or any other WCT is there please guide me 

 
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Dear Sir

I would like to know whether any separate registration is required for WCT under Karnatak VAT(KVAT) for my existing client who is alraedy registered under KVAT.

Please advice.

Thanking You

Rahul Paul

CA Final.

EMail:rahul4paul @ gmail.com

 
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glidor@gmail.com


@ Rahul Ask client to visit the VAT office for inclusion / amendment of works contract in his vat rc. service tax registration is additional for works contract.

 
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