Works contract
This query is : Resolved
21 August 2014
when the liability to pay wct arises? at the time of sale or receipt?
21 August 2014
at the time of sale........................
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21 August 2014
at the time of sale........................
21 August 2014
so we should show tax collected and sale amount in corresponding quarterly sales tax return, right.
Is it same in coposite scheme of works contract?
Is it same in coposite scheme of works contract?
03 August 2025
Great question — and you're on the right track. Let's clear up the timing of liability for Works Contract Tax (WCT) under Andhra Pradesh VAT (APVAT) and how it applies in both regular and composition schemes as of August 2014 (pre-GST).
🔍 Q1: When does WCT liability arise?
✅ Answer: At the time of deemed sale (transfer of property in goods)
In a works contract, the sale is not of goods per se, but of property in goods involved in execution of works. Under APVAT:
The liability to pay VAT (WCT) arises at the time of transfer of property in the goods to the contractee — i.e., when materials are used/incorporated in the works.
This typically coincides with billing or recognition of turnover in books.
📌 Practical treatment:
In most cases, WCT is paid and reported in the VAT return for the quarter in which the invoice is raised (or material is deemed to be transferred), even if payment is received later.
🔍 Q2: Should tax be shown in the quarterly sales tax (VAT) return?
✅ Yes
In the VAT return (Form VAT 200):
You should show:
Gross value of contract executed during the quarter
Value of materials transferred
VAT collected and payable
This applies to both regular and composition schemes, with differences in reporting format.
🔍 Q3: Is it the same under the Composition Scheme?
✔️ Yes, conceptually same — tax liability arises based on execution/billing, but the calculation is simplified.
🧾 Under Composition Scheme:
WCT is paid at a fixed percentage (e.g., 5%) of total contract value
No input tax credit (ITC) is allowed
You still report contract value and tax payable in your quarterly return, but you don't need to bifurcate material and labour
You do not show individual purchases or sales of goods — just total contract receipts
✅ Summary Table:
Aspect Regular Scheme Composition Scheme
Time of WCT liability At time of transfer of property in goods (sale) Same
Return Filing Show material value, VAT, ITC in VAT-200 Show contract value and VAT on total value
Input Tax Credit ✅ Allowed ❌ Not allowed
Basis of VAT Value of material in contract Total contract value
🔍 Q1: When does WCT liability arise?
✅ Answer: At the time of deemed sale (transfer of property in goods)
In a works contract, the sale is not of goods per se, but of property in goods involved in execution of works. Under APVAT:
The liability to pay VAT (WCT) arises at the time of transfer of property in the goods to the contractee — i.e., when materials are used/incorporated in the works.
This typically coincides with billing or recognition of turnover in books.
📌 Practical treatment:
In most cases, WCT is paid and reported in the VAT return for the quarter in which the invoice is raised (or material is deemed to be transferred), even if payment is received later.
🔍 Q2: Should tax be shown in the quarterly sales tax (VAT) return?
✅ Yes
In the VAT return (Form VAT 200):
You should show:
Gross value of contract executed during the quarter
Value of materials transferred
VAT collected and payable
This applies to both regular and composition schemes, with differences in reporting format.
🔍 Q3: Is it the same under the Composition Scheme?
✔️ Yes, conceptually same — tax liability arises based on execution/billing, but the calculation is simplified.
🧾 Under Composition Scheme:
WCT is paid at a fixed percentage (e.g., 5%) of total contract value
No input tax credit (ITC) is allowed
You still report contract value and tax payable in your quarterly return, but you don't need to bifurcate material and labour
You do not show individual purchases or sales of goods — just total contract receipts
✅ Summary Table:
Aspect Regular Scheme Composition Scheme
Time of WCT liability At time of transfer of property in goods (sale) Same
Return Filing Show material value, VAT, ITC in VAT-200 Show contract value and VAT on total value
Input Tax Credit ✅ Allowed ❌ Not allowed
Basis of VAT Value of material in contract Total contract value
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