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works contract tax

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This query is : Resolved

shweta (Querist)

03 March 2010 A proprietor deals in sale of petty electrical goods at shop & his major business consists of electrical fittings contract , which includes goods as well as labour charges.here we can take his goods to labour charges ratio to approx. 90:10.

So if anybody could please explain,how to charge VAT here..

Currently he is charging VAT on goods & showing labour charges separately in the invoices on which no tax is levied.He also avails set off on input goods used.

I will be thankful if this issue gets resolved. Thanx in advance!!!!

CA V. Mohanakrishnan

CA V. Mohanakrishnan (Expert)

04 March 2010 Considering the way the invoice is being raised, the person does not seem to have opted for the composition scheme under service tax as well as VAT.
Works Contract under VAT of each State has been differing. So further information is required before we can comment.
As far as service tax is concerned, either he can adopt for composition scheme paying 4% + cess on the complete bill (where no cenvat credit is available for goods purchase) or where there is a possibility of identifying goods and services a as above, VAT can be calculated on 90% and service tax on 10%. Should be in a position to justify the breakup

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