Work & contract tax / wct

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 March 2013 Hi Every one i want to know about Work and contract tax. like on which kind of transaction or assessee this tax is applicable. and how to compute it and in DVAT 16 return form it is shown for taking input so how can we claim input in case of WCT in DVAT 16 form. and Give a suitable example to compute WCT tax considering an interior decorator company want to compute its wct..??

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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02 March 2013 The works contract tax is leviable on the transfer of property involved in a contract. This means VAT on the material value of a contract work. In an interior decoration work mterials like timber,iron sections,plywood,paint,hardware,plasterof paris etc are used.From the total receipts a contractor can claim exemption on the labour content and pay vat on the value of different materials consumed and their tax rates. He can deduct an amount equal to the vat paid on thier purchases. This rule exists in all states......MJK

Querist : Anonymous

Querist : Anonymous (Querist)

03 March 2013 Dear Sir My uncle is doing painting contractor business where he employed labours for painting works like pop whitewash etc. so he is liable for wct tax or not..?? in delhi area..??

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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03 August 2025 Here’s a detailed explanation on Work & Contract Tax (WCT), especially related to your queries about applicability, computation, and claiming input in DVAT 16 form, along with an example for an interior decorator:

1. What is Work & Contract Tax (WCT)?
WCT is a form of VAT levied on the transfer of property involved in the execution of a work contract.

It essentially targets the material portion (goods) involved in contracts where services and materials are combined.

Applicable on contracts involving construction, repair, renovation, decoration, and related services where materials are supplied and used.

Different states have their own WCT rules and rates (e.g., Delhi, Haryana, Maharashtra).

2. On Which Transactions / Assessees is WCT Applicable?
Contractors, sub-contractors, or service providers executing contracts involving transfer of goods along with services.

Includes civil contractors, decorators, painters, repairers, fabricators, etc.

Pure labour contracts without material supply may not attract WCT (depends on state laws).

In Delhi, for example, painting, interior decoration works involving transfer of goods are generally liable for WCT.

3. How to Compute WCT?
The contract value is bifurcated into:

Material portion (VAT applicable)

Labour/service portion (non-taxable under VAT)

WCT is levied only on the material value (transfer of goods involved).

Input VAT paid on goods used can be claimed as credit/deducted from output VAT liability.

Rate: Varies by state (e.g., Delhi WCT rate ~4%, Maharashtra 5%).

4. How to Claim Input in DVAT 16 Form?
DVAT 16 is the Return Form for VAT in Delhi.

Input VAT paid on purchase of goods (materials used in contracts) can be claimed as input tax credit.

To claim credit, keep purchase invoices with VAT details.

Input VAT can be set off against output VAT liability (WCT in this case).

Labour/service portion does not attract VAT, so no input credit there.

5. Example: Interior Decorator Company Computing WCT
Assumptions:

Contract Value: ₹10,00,000 (Interior decoration work)

Material Cost (timber, paint, hardware, etc.): ₹6,00,000 (VAT @ 12.5%)

Labour/Service cost: ₹4,00,000 (No VAT)

Input VAT paid on materials purchased: ₹75,000

Computation:

Description Amount (₹)
Contract Value 10,00,000
Material Value (transfer of goods) 6,00,000
Labour/Service Value 4,00,000

Output VAT (WCT) on materials:
6,00,000 × 4% (assumed WCT rate) = ₹24,000

Input VAT Credit: ₹75,000 (paid on materials)

Since input VAT > output VAT, net VAT payable = NIL, and you can carry forward the excess input VAT credit.

6. Painting Contractor in Delhi (Query)
If your uncle employs labour for painting (e.g., whitewash, POP), and materials are involved (paint, POP), WCT is applicable on the material portion.

Pure labour contracts without material transfer may not attract WCT.

Check specific Delhi VAT rules for detailed applicability.

Summary:
WCT applies mainly on material portion in contract.

Labour portion usually exempt from VAT.

Input VAT on material purchases can be claimed in DVAT 16.

Rates and rules vary by state—Delhi’s rate typically ~4%.

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