Works contract vs contract for purchase of goods

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Praveen Nigam (Querist)

06 December 2007 I would like to give two cases:
1) Contract for printing files / envelop / writing pad etc on which logo as well as name of my company is appearing.
2) A book which contains financial performance of the company.

In both the cases we do not supply any material to the printer like paper/ink etc.
My question is:
1)whether above two cases are works contract or contract for purchase of goods.
2)whether contractor can charge VAT for doing above job.

KAUSTUBH M JOSHI

KAUSTUBH M JOSHI (Expert)

06 December 2007 As per my knowledge Printing of files/ envelopes/ writing pad cannot be called as works contract. For your second question I will say that he may charge VAT on material part & service tax on labour part (both if applicable) i.e. depending on his turnover & type of business he carries. Therefore type of business that contractor carries is also material in that case.
In your second case the same above will be applicable.

CA. O.P. Agarwalla

CA. O.P. Agarwalla (Expert)

11 December 2007 VAT will be applicable.

Either you will have to treat it as contract of sales (In the spirit of Apex Court's decision in Kone Elevators Case)or you will have to traet it as a woks contract, If it is a contract of sales, VAT will be levied on applicable rate.

If it is a works contract, we will have to find out whether the aid works contract falls under the ambit of VAT? Decisive factor in deciding the issue is whether any transfer of property has been made during the execution of works contract? I think yes it is happened and accordingly if it is a wroks contract, it is taxable (under VAT Act)contract.

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