upvat on wct

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manoj (Querist)

24 June 2011 Dear Sir
We are working in Uttar Pradesh as a contractor of civil work. Suppose 3 parties are involve in this project.

Party no. - (A)(contractee) has award the contract to (B) and deduct the TDS(UPVAT)@4% on payment and

Party no. - (B) has sublet the contract to C (Rate fix)

Now my question is whether B will deduct TDS on payment made to C or not ? If yes then what will be the rate of TDS(UPVAT)? (Both B and C are in compounding scheme)

Please clarify.

MJ Krishnamurthy

MJ Krishnamurthy (Expert)

26 June 2011 Mr Manoj,
I will give you the general position as adopted in all VAT laws and ruled by the courts. No transaction is to be taxed twice.What has already suffered tax has to be given exemption and the balance is to be taxed in each hand in the chain of contractors involved.Now,'A' is the main contractor.He allots a part or whole of his job to "B',who again does so to 'C'. Suppose all the three are registered contractors under UPVAT Act. Then first 'C'issues bill to 'B'on the work done,and in turn,'B' issues his bill to'A'by adding his profit.At last 'A'raises his final bill by adding his profit and expences.Billing value increases from 'C' to A due to profit and expences.Here,'B' can claim exemption on the 'C's bill,and again,'A' can claim exemption on'B's bill,as they have been already declared in returns/suffered tax.In this way 'C pays tax on the work done by him,and susequently,'B' and 'A' pay tax on the profit and the other service value added by them.There will be no double taxation.
MJK

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