Vat and wct

Mahavat 23100 views 7 replies

Rashmi

Accountant

140 Points Joined January 2013

Hi.......

Assessee is a contractor supplying labour and material to builders, where he use to charge Vat and Service tax appropriately, but some builder issuing payment deducting W.C.T and some of not,

Detail as below

Sales labour with material to a Rs. 500000/-

Add Service Tax @ 12.36% at 40% with rivers mechanism Rs. (500000*40%)*12.36%=24720/2=12360

MVAT @ 5% (500000*5%)=25000

Total bill = 500000+ 12360+25000=5,37,360=

Payment received from A.

Bill Amount Rs. 537360

Less TDS 1% = (537360*1%)=5374

Less Retention. 10% (537360*10%)Rs. 53736

Less WCT. 2% (537360*2%)=10747.00

Net payment Rs. 467503.00

VAT payable Rs. 25000/-

Less Purchase VAT . (200000*5%)Rs.10000/-

Less WCT. Rs. 10747.00

VAT Calculation Rs. 25000-20747=4253.00

Net payable . Rs. 4253.00

Is this the right calculation?

If yes then what about those bills which payments are till due.

Please suggest…………

Rashmi

Replies (7)

Here I notice two errors. One WCT deduction(tds) @ 2% should not be made on Rs5,37,360/- but on Rs5,00,000/- only. So,the deducted amount should be Rs10,000/- only ,not Rs10,747/-.Secondly,the retention money at 10% also should be on the bill value only ,not including the taaxes payable. This amount must be Rs50,000/- only ,not Rs53,736/-. The client has to pay Rs4,71,986/-.Net payable will be Rs5,000/-.TDS should be done on the principal amount and not also on the taxes charged on it.......mjk

Rashmi

Accountant

140 Points Joined January 2013

Thank you very much sir for your excellent explanation, but the company has deducted the tax according to my above calculations, I mean, they have deducted W.C.T. on total amount (inclusive all taxes), If you don’t mind sir, could you please provide a relevant case law to end the above contradiction. this is only for my reference.

Regards

Rashmi

MJ Krishnamurthy

ACCT(Retd)

7197 Points Joined July 2010

See, tax is leviable on the sale value. A tax collected in an invoice(both VAT and ST) is not a sale value. Hence,tax deduction made on the amounts of tax collection also becomes an excess.You may point out this to your company and get it rectified. Many accountants blindly follow wrong methods.....mjk

Krishan Aggarwal

Audit

233 Points Joined September 2008

TDS is to be deducted on Value + VAT (excl. Service Tax). Also, WCT needs to be deducted on Basic Value (excl. all taxes).

Reference:
This is as per new circular 01/2014 dated 13.01.14 issued by Central Board of Direct Taxes, India to get exemption on TDS on service Tax. No TDS on Service Tax if Shown separately under all sections on payment to resident.

Hence, TDS is to be calculated on the Basic Amount + VAT (if applicable - In case of Work Contract Tax) and not on the Gross Amount [or TDS is to be calculated only on the Basic Amount (if VAT is not applicable)]. Service Tax component is to be excluded from TDS calculation.

Samir Kuamr Rathore

Accountant

21 Points Joined July 2015

TDS calculation is wrong. But my question is how we will calculate WCT if its comes under RCM on service tax. I think on RCM WCT will be calculated only on Service Provider not on Receiver. Please comment .