Works contract tax in karnataka

  Mr Rajesh : Your points on the works contract in Karnataka are correct,but with these variations.:1) The tax rate is 14.5% on the value of goods transferred to the clients.Here the value of materials includes the purchase value plus profit(gross).2) Generally the labour and other services content in a civil work is 30% only. It can go to even 50% level but to claim it you have to maintain accurate account to support the exemption claims.On whatever you claim as labour and service charges,or a minimum of 40% will be liable for Service Tax   @ 14%. ....mjk

thank you. you saved my day.. works contract (civil work) is taxed @ 14% (14.5) whatever may be  the ratio you split it for sales tax and service tax..understand it. luckily road works are exempted from service tax, so we dont have to deal with it for now

in other states (eg.MH) TPG (taxable turnover) corresponding to 5% purchases are taxed at 5% and taxable turnover corresponding to 14% are taxed at 14%.  but here in karnataka they have given separate rate (14.5%) for works contract. so here taxable turnover, though it might involve only 5.5% purchases, is taxed at 14.5%

am i getting it right?

Wish to add that State has not power to levy VAT above 5% on Declared Goods. Hence, VAT has to be paid at 5% on the declared goods. Material portion can be seggregated into Declared goods and others and accordingly VAT needs to be computed.

Mr Raju: Your point is correct when the declared goods are sold in the same form. Here in a contract the declared goods may be used for fabricating or other purpose and they will not be in the same form when the work of contract is completed. In the case of M/s Nagarjuna Constructions Vs St of Karnataka, the KHC has decided that Iron and Steel used in a contract in the same form must be charged @ 5% only. But, this matter is very much controversial and very often not enforced........mjk

Sir Myself CA Abhijeet Thorat from Pune

Sir I we followed 4% method can we purchase input materials against C form..... 

In Maharashyta the rate of tax for composition dealers,who are doing works contract is 5%,not 4%.Please check it up again. Secondly,unlike in Karanataka,I do not find any restrictions on use of 'C' forms for interstate purchases. Contractors are also dealers and they are also allowed to use CST forms.Even if there are any restrictions,it will be on treating the turnover generated by interstate purchases seperately and taxing it at appropriate rates .......mjk

A DEALER REGISTRED UNDER VAT WORKS CONTRACT AND  SERVICE TAX. SEND ME THE BILL FORMAT. I MEAN VAT RATE AND SERVICE TAX RATE WITH %.

A DEALER REGISTRED UNDER VAT WORKS CONTRACT AND  SERVICE TAX. SEND ME THE BILL FORMAT. I MEAN VAT RATE AND SERVICE TAX RATE WITH %.

Mr Rajesh : Sorry this reply is delayed. Your point is correct. In Karnataka there is a common rate on the goods used in a works contract.Your point that ITC and TDS deductions are to be made before making payments of tax is also correct.ITC is available only on purchases made from  dealers within Karnataka,not intersate.......mjk