WCT Credit
This query is : Resolved
CA Ravi Sisodia
(Expert)
14 July 2010
There are three option to pay WCT ie. A 1 option, A 2
option, B option; these option depend upon the
credit/setoff availability.
A-1 Option (Levy of VAT on Works Contracts in the hands of
the Contractor)
Under the legal option A-1, the VAT is payable on the
`Material Value’ of the Contract. The deductions are
available for arriving at the Material Value from the total
contract price.The 4% or 12.5% VAT would be applicable on
such Material Value /Price, depending upon the
classification of such materials (Steel 4%, others 12.5%
VAT) in which the property passes to the contractee .
option A-2, the VAT is payable on the `Material Value’ of
the Contract. The Material value is calculated after
deducting the `Labour Portion’ from the total contract
value / Price.
However, in this option a table is available in the State
VAT Act / Rules which shows `Standard Labour portion’
attributed to the various works contracts. The Contractor
has to deduct such `Standard Labour portion’ shown in such
tables from the total Contract price to arrive at the
`Material value’. The Contractor would charge 12.5% VAT, on
such material value. Each State has provided the said
`Standard Labour’ table , under this option. (Like in
Maharashtra for Civil Works it is 30%, for Plant &
Machinery 15% , for AMCs 40% and for others 25%
(Residuary)) .
Option B is the “Composition Tax” option. This is a non
legal alternative option, simplier option for those
Contractors who cannot maintain the proper Accounts, Record
of the material and other portion in their contracts. The
contractee / customer prefers this option as small amount
of Composition Tax 2% / 4% is payable to the Contractor
instead of 12.5% VAT payable in legal options. A-1 and A-
2 . However , VAT credit/set off is not be available to
them in this option ( in this option , VAT Credit is
available only in the state of Maharashtra ) .
option, B option; these option depend upon the
credit/setoff availability.
A-1 Option (Levy of VAT on Works Contracts in the hands of
the Contractor)
Under the legal option A-1, the VAT is payable on the
`Material Value’ of the Contract. The deductions are
available for arriving at the Material Value from the total
contract price.The 4% or 12.5% VAT would be applicable on
such Material Value /Price, depending upon the
classification of such materials (Steel 4%, others 12.5%
VAT) in which the property passes to the contractee .
option A-2, the VAT is payable on the `Material Value’ of
the Contract. The Material value is calculated after
deducting the `Labour Portion’ from the total contract
value / Price.
However, in this option a table is available in the State
VAT Act / Rules which shows `Standard Labour portion’
attributed to the various works contracts. The Contractor
has to deduct such `Standard Labour portion’ shown in such
tables from the total Contract price to arrive at the
`Material value’. The Contractor would charge 12.5% VAT, on
such material value. Each State has provided the said
`Standard Labour’ table , under this option. (Like in
Maharashtra for Civil Works it is 30%, for Plant &
Machinery 15% , for AMCs 40% and for others 25%
(Residuary)) .
Option B is the “Composition Tax” option. This is a non
legal alternative option, simplier option for those
Contractors who cannot maintain the proper Accounts, Record
of the material and other portion in their contracts. The
contractee / customer prefers this option as small amount
of Composition Tax 2% / 4% is payable to the Contractor
instead of 12.5% VAT payable in legal options. A-1 and A-
2 . However , VAT credit/set off is not be available to
them in this option ( in this option , VAT Credit is
available only in the state of Maharashtra ) .
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