Work contract service

“works contract” means a contract wherein,—
(i) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and
(ii) such contract is for the purposes of carrying out,—
(a) erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation
of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or airconditioning
including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water
proofing, lift and escalator, fire escape staircases or elevators; or
(b) construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce
or industry; or
(c) construction of a new residential complex or a part thereof; or
(d) completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or
(e) turnkey projects including engineering, procurement and construction or commissioning (EPC) projects;

According to the above definition works contract does not include preparatio of various furniture articles since works contract is only related to providing of services in relation to plant, machinery, equipment etc. Your client has to register under interior decorator services. Composition scheme is not available for services other than works contract services

  Mr Rahul,

 I am sorry, I have differ much from the opinion of Mr A siddapur. Please refer to the definition given in Sec 2 (37) of KVAT Act 2003, :

  Works Contract : includes any agreement for carrying out for cash,deferred payment or other valuable consideration,the, building,construction,manufacture,processing ,fabrication,erection, installation,fitting out,improvement,modification,repair or commissoning of any movable or immovable property

   Similarly,definition of works contract can be seen in many other VAT Acts also. This definition widens the scope and type of work under the head of works contract. Please see the VAT law of your state. If it restricts the scope of WC to only a few items , then you can take exemption.In Karnataka and some other states Interior decoration, fitting of furniture and fixtures are taxable under VAT law. @ 14%.By taking your example,if the material cost is Rs40,000/- add normal profit to it,say, Rs 10,000/-=Rs50,000/-. This is the taxable amount and the tax on it becomes Rs7,000/-.The balance amount is chargeable with ST.

MJK

BUT HE IS REQ. TO BUY MATERIAL AND PRACTICALLY IT IS NOT POSSIBLE FOR THEM TO BIFURCATE HOW MUCH VALUE OF MATERIAL IS USED IN PERTICULER PROJECT FOR WHICH THEY RECEIVED PAYMENT AND REQUIRED TO PAY SERVICE TAX ON IT.

ALSO AS PER DIFFINATION INTERALIA "transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods"

ACCORDING TO MY INTERPRETATION TRANSFER OF PROPERTY MEANS THE MATERIAL  PURCHASED AND WHEN IT IS USED IN EXECUTION OF WORK LEVIABLE TO SALE OF GOODS MEANS I HAVE TO PAY VAT.

ALSO IF WE REFER THE CASE WHEN WORK CONTRACT SERVICE WAS INTRODUSED. IT WAS BECUSE IN CASE OF INDIVISIBLE CONTRACT IT IS NOT POSSIBLE TO BIFURCATE THE MATERIAL USED(VAT LIABLITY) AND LABOUR SERVICE PROVIDED(SERVICE TAX LIABLITY). 

ALSO IF WE REFER THE DAELIM INDUSTRIAL LTD 2003(TRIBUNAL) CASE LAW THEN IN THAT CASE ASSESSEE DOESNT PAY ANY SERVICE TAX IN CASE OF INDIVISIBLE CONTRACT. AND TAXABILITY OF COMPOSITE  INDIVISIBLE CONTRACT BECOME PRONE TO LITIGATION WITH MANY TRIBUNAL DECISIONS COMING IN FAVOUR OF ASSESESS. AND BEFORE MATTER REACH TO SC CENTRAL GOVT. INTRODUCED SEPRATE CATEGORY OF WORK CONTRACT W.E.F 1/6/2007 AND RULE 2-A OF SERVICE TAX RULES-2006

ACCOURDING TO ABOVE EXPLAINATION CAN YOU NOW PLEASE ABLE TO GIVE ME YOUR OPINION ON THA SAME.

AND IN MY CLIENT CASE WE ARE ALREADY PAYING VAT LIABILITIES BY COMPOSITION AT THE RATE OF 8% OF GROSS RECEIPT. AND IN MAHARASHTRA STATE IT IS ALLOWABLE. THERE IS NO DIFFICULTY FOR VAT. AND ALSO FOR THE SAFFER SIDE I ALREDY REGISTERD  HIM FOR BOTH INTERIOR DECORATOR SERVICE AND WORK CONTRACT SERVICE. BUT NOW I AM GETTING DIFFICUTY IN CALCULATION OF S.TAX. AND NOT ABLE TO GIVE EXACT OPINION FOR THE PAYMENT OF S.TAX AND ABOUT PREPARTION OF BILL.