Difference between works contract & pure sale transaction

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darpan chheda (Querist)

20 August 2010 What is the difference between works contract & transaction of pure sale... At times, it is very confusing in terms of application of TDS on the same, as i am aware that works contract is subject to TDS, whereas the later is not. Can you please explain difference between the two with some examples

THanks in advance...

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)

20 August 2010 You can take one Example of Road construciton,

If You are supplying only materials for road construction is Pure Material sale

If you are doing Only labour work for road construction without providing material is pure labour

If your are doing Material supply, labour work and related civil nature of works,then it is called Work contract

In the sale invoice you are billing Material and other works like labour, civil work then it is called works contract

CMA. Subhash Kumar Jha

CMA. Subhash Kumar Jha (Expert)

20 August 2010 A work contract : There has to be job work / service provided. i.e printing work including paper.

Pure sale : No service required , its a mere sale of one's article to another. i.e stationery supply only

darpan chheda

darpan chheda (Querist)

20 August 2010 Thanks for the reply sir...

Can you please tell me whether the following transaction is works contract or pure sale.

A company gives a contract for getting the furniture prepared for its office. Now the contract is a composite one( Labour + Material). Now the questions are

1. IF the contractor gives a composite bill & the bifurcation into material & labour portion is not possible. Will TDS be applicable

2. Incase of separe bills, what will be the effect...?

3. If we buy the furniture from the open market(Definitely a pure sale transaction). Then how is it different from the above transaction...? Can we escape TDS provisions by treating the above contract as contract of sale of furniture...?

Please explain...

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)

20 August 2010
1.If the bill is provided composite then it is work contract, tds will be applicable on total bill

2.Differnet bill -the TDS applicable for labour bills

3.While purchaseing open market the furniture is ready for sale,already the furniture supplier paid the labour and material everything so tds responsiblity is on that supplier, for you that is you are paying only as furniture material so TDS not applicable

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