Fabrication contract

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Udayraj Prabhune (Querist)
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23 August 2011 We have to issue a fabrication contract in which we will supply steel & he will use his machinery & consumables. Please guide us about the taxation such as service tax, vat/wct.Please note contractor is from outside Maharashtra.

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24 August 2011 VAT is payable on the value of goods transferred to the client. In your case, it is a fabrication contract, main materials are supplied by you. The sub-contractor is laible to pay VAT only on Electrodes cost only. All other consumables such as gas, etc are not taxable under VAT.

In case of service tax, he has to pay tax at 10.3% on full value of contract. If he opts to pay tax under Works Contract composition, then he has to add the value of all free issue materials and arrive at the value on which 4.12% is chargeable.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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24 August 2011 my view it will be covered under works contract on both VAT & Service tax. In case you can raise the bill clearly as Material and labour potion then you can pay VAT for material and Service tax for Labour

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