03 August 2025
The assessment procedure for works contracts and related tax rates under Andhra Pradesh VAT (APVAT) as of 2012 are based on the AP VAT Act, 2005, which governed the taxation of works contracts before the implementation of GST (in 2017). Here's a breakdown: ✅ 1. Assessment Procedure for Works Contract (Earth Work + Material Work) Under AP VAT, a works contract includes both labour and material components. The procedure to assess VAT liability typically involved the following steps: Step 1: Identify Nature of the Contract Pure labour contract → Not liable for VAT Composite contract (labour + material) → Liable for VAT on the material portion Step 2: Choose Taxation Method Dealers had two main options: A. Regular Method (Actuals/Accounts Method) Contractor maintains books to separate labour charges and material cost. VAT is paid on the value of materials used in the contract. B. Composition Scheme (Simplified) Instead of maintaining detailed accounts, the contractor pays tax at a fixed percentage on the total contract value. Easier compliance, but no input tax credit allowed. ✅ 2. VAT Tax Rates for Works Contracts (As of 2012 in A.P.) A. Regular Scheme: VAT at applicable rates for individual goods used in the works contract (e.g., cement, steel, etc.) Cement: 14.5% Steel: 5% Others: as per schedule of APVAT Act B. Composition Scheme Rates (for Works Contracts): Type of Work Tax Rate under Composition Scheme Civil Works (including material and labour) 5% Pure Labour Works NIL Sub-contracts 1% Government Contracts 4% 💡 Note: These rates apply on gross contract value (no input tax credit is allowed under composition scheme). ✅ 3. Procedures Followed in APVAT for Works Contract A. Registration: Mandatory VAT registration if annual turnover exceeds ₹5 lakhs. B. Maintenance of Records: Contractors under regular scheme must maintain: Purchase & sales records Separate identification of labour and material C. Filing of Returns: Monthly/quarterly VAT returns in Form VAT 200 Details of contract receipts, tax paid, purchases, and input credits D. Payment of VAT: Due monthly, by the 20th of the following month E. Annual Audit (if turnover exceeds threshold): Audit report in Form VAT 240 to be submitted ✅ Summary: Aspect Regular Scheme Composition Scheme Books of Account Required Not mandatory Input Tax Credit Allowed Not allowed Tax Calculation On value of goods used On total contract value Rates As per goods used (5%, 14.5%, etc.) Fixed % (1%, 4%, 5%) ⚠️ Important Notes: This answer applies only to the pre-GST era (before July 2017). Under GST, works contracts are treated differently and taxed under 18% in most cases.
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