Works contract

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Ann Joe Mampilly (Querist)

05 June 2014 Awarder has awarded a contract of Rs. 1.5 crores. Certain materials like cement and steel the awarder will supply. Can the works contractor apply for compounding option? If so, what will be the contract value, Rs. 1.5crores minus value of cement & steel?

Thanks in advance

Amol S Joglekar

Amol S Joglekar (Expert)

05 June 2014 yes, he can opt for composition. (The value of the contract shall be the value as is spelt out in the contract....in simple words, if the contract provides for a deduction for the supply of cement and steel by the awarder, then the value of the contract shall be reduced by that amount, otherwise NO)

MJ Krishnamurthy

MJ Krishnamurthy (Expert)

06 June 2014 It depends on terms of the contract.Generally government and semi-govt works are awarded on partial supply(cement and steel)basis. If contract rates are quoted for whole work then the value of supplied goods are also included in the turnover.If the rates quoted are exclusive of supplied goods then the value of free supply material has to be reduced from the turnover.In the first method the contractor loses the ITC benefit related to purchase of free supply goods,because the bills will be in the name of the owner of the project.So composition scheme is beneficial for thesecond method.....mjk

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