Works contract procedure to be followed

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This query is : Resolved

Madhu (Querist)

24 August 2011 DEAR SIR,

RECENTLY WE RECEIVED AN PURCHASE ORDER FROM ONE OF OUR CUSTOMERS FOR WORKS CONTRACT UNDER COMPOSITION SCHEME

WE ALREADY REGISTERED UNDER APVAT ACT AND SERVICE TAX ACT
SO PLEASE TELL US THE PROCEDURE OF COMPLIANCE TO BE FOLLOWED

THANKS IN ADVANCE
MADHU

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)

24 August 2011 Under VAT you need to deduct WCT tds on bills submitted by the contractor

MJ Krishnamurthy

MJ Krishnamurthy (Expert)

26 August 2011 Mr. Madhu,
From your question I understand that you are already registered in AP and paying taxes under VAT scheme. Now one of your customers has asked you to take up a WCT(issued a purchase order)and agreed to pay WCT tax under composition scheme. In the VAT scheme you will be charging 12.5% vat to the customer and taking credit of input tax of purchases.Now your customer offers to pay only 4% or 5% VAT on the T.O.You can not mix up vat and composition schemes under one registration.There are two ways to solve this problem.1) you can take up a new registration for this purpose only and opt to pay tax under composition..2) Do not charge any tax in the bill,but mention that the value is inclusive of taxes. Include the tax in the bill value,but pay tax on the whole of invoice value.Do not give the details of tax inclusion to your customer. I think this idea solves your problem.
MJK

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