Kvat on works contract

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Anjitha Elizabeth Innocent (Querist)
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27 October 2012 Dear sir,
Can you plz explain the applicability of Kvat
on income received for construction and sale of flats and villas. What is the rate of tax?
I think vat is applicable for purchases and sales of goods, then why vat is paid for servicses like this. Plz correct me if i am wrong and resolve my querry.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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28 October 2012 1) If construction of flats / villas is undertaken as 'works contract', vat attracts either under normal tax rate (12% in Kerala) ,subject to deduction for labour and other service element involved therein OR at compounded rate (3%) in Kerala) on the gross receipts.

2) After the 46th amendment to the Constitution of India transfer of property of goods used in the execution of works contract attracts value added tax being deemed sale thereof. Hence levy is mandatory.

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