work contract taxation in Karnataka VAT

CA. C V SURYAM (Practising Chartered Accountant) (865 Points)
Replied 08 October 2008

Ms.Sreelalitha, VAT/WCT is on materials only which is a thumb rule. This tax liability in either way you discharge (by TDS or by Cash/Cheque), it should be on the value of materials transferred in execution of works contract. Apparently, you may observe that labour and services etc., wherein no materials are involved, are given exemption under any State VAT Act. Thus, you may further find that consumables which are consumed in the process of execution of works contract and not transferred to the Client are not exigible to WCT/VAT. Of course, all these are applicable under non-composition scheme. In your case, it is composition wherein VAT/WCT is payable at the prescribed rate of tax on the total gross amount of contract. Now, please note that:

1) Client is supposed to made VAT TDS on gross at the prescribed % of rate since you are in composition and he is not supposed to made TDS on the labour amount which is not exigible to VAT/WCT.
2) Since you are under compostion scheme, in addition the above VAT/WCT at the prescribed rate of tax, you are liable to discharge the VAT liability on the purchase of materials from outside Karnataka and used in execution of works contract. This additional liability shall be calculated as follows:
a) If such goods fall under 4% category schedule of KVAT Act, you will not have any further liability.
b) If such goods fall under 12.5% category schedule of KVAT Act, you will have to discharge VAT / WCT @ 8.5% (12.5% - 4%).

Hope I made clear your query. If any futher clarity is needed, please feel free to contact me at CVSURYAM @ REDIFFMAIL.COM.

VASANTH D JAGANATH (Professional) (396 Points)
Replied 08 October 2008

Dear Madam / Sir

I would like to add some more points in this regard as under:

For composite dealers executing works contract as per notification No.FD 116 CSL 2006(13), Bangalore, dated 31-3-2006 the rate of tax payable is 4% on the total consideration for the works contract executed.

From 1-4-2006 section 15 [composite dealers] has been amemded to permit the composite dealers to purchase goods from interstate subjection condition that, such dealers should pay tax under section 4 [i.e., if such goods falling under the rate of 4% should pay at 4% or if such goods falling under the rate of 12.5% should pay at 12.5% under the KVAT Act,] this tax should be payable on the value of interstate purchases without adding profit

For the balance turnover [i.e., total consideration - interstate purchases] at the rate of 4%.

If you are executing a works contract for Govt. Company, as per section 9-A, TDS is applicable. Govt. Company has to deduct the tax at source and remit to the Department. Tax to be deductible under this section is equal to the tax payable by you.

in this situation you need to compute an hypothetical if actual not possible example working out the approximate tax payable on payments receivable by you.

based on this i would like to conclude here that, the question of bifurcation of material and labour does not arises for the purpose of TDS. It depends on your working to be given to your customer.

SREELALITHA V (Audit Assistant) (98 Points)
Replied 08 October 2008

Thank you Sri. Suryam and Sri. Vasanth Kumar J.

Pl . let me knwo the service tax liability on Electrical works contract.

Regards.

(Guest)

PLEASE TELL ME WORKS CONTRACT TAX ON EXECUTION OF WORKS CONTRACT i.e DEVELOPMENT OF LAND,BUILDING ETC

(Guest)

i want to know that what is the rate of wct in karnatka regarding interior, electrical work in Gulberga place

Pragnesh P Thakkar (Account Officer) (56 Points)
Replied 10 May 2010

is Compotion tax is service tax or VAt we cant take this credit if bill from karnataka

hanumantharaju (Accountant) (21 Points)
Replied 20 January 2011

Please guide anybody about COT its applicable in Which industry. Becoz i am working in one service industry we are taking the contract to service for the Fire Fighting Vehicles. In India We have around 4 to 5 Airports Contract. Now we are raising the service bills only .This is right or any other WCT is there please guide me

RAHUL PAUL (MANAGER) (25 Points)
Replied 15 April 2011

Dear Sir

I would like to know whether any separate registration is required for WCT under Karnatak VAT(KVAT) for my existing client who is alraedy registered under KVAT.

Please advice.

Thanking You

Rahul Paul

CA Final.

EMail:rahul4paul @ gmail.com

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 28 April 2011

@ Rahul Ask client to visit the VAT office for inclusion / amendment of works contract in his vat rc. service tax registration is additional for works contract.

PRAKASH.A.HEGDE (ACCOUNTANT) (23 Points)
Replied 02 August 2011

if we are registered under composition Tax and purchasing a material form interstate is we need t o pay local tax on interstate purchase.any boady pl clarify