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Works contracts tax

A.J. Rajasekhar (Executive - Finance) (132 Points)

04 January 2012

Dear Friends,

What is meaning of Works Contract Tax (WCT)? Our client is deducting in our Sales bills (Civil) 2% on every bill in the name of WCT, How i will get back?

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7 Replies

CA MAULIK (C.A) (937 Points)
Replied 04 January 2012

ITs a TDS...governed by incometxaws

CA Ketan Waghela (Partner at Elite Educare) (356 Points)
Replied 04 January 2012

Jayarajasekhar ji,

What your client is deducting is TDS on contract @ 2% as they might be crossing the limit u/s 194C. Balance amount (after deducting TDS) is paid to you. You can demand for certificate FORM 16A for this deduction and can claim credit at the year end while paying tax on income.

“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 prefabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning 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;

Members, Please correct me if I,m wrong.

2 Like

@*CS Siddharth Bumb. * (B.Com, CA Final, CS ) (5270 Points)
Replied 04 January 2012

thank you ketan sir, i was hardly know about WCT now my concept clear more

Maheshkumar Sharma (CA) (134 Points)
Replied 05 January 2012

I am considering the word " sales Bills " in the above query by Jayrajsekar.

WCT is governed by 2 seperate enactments- Income tax and Sales tax/State VAT.

Whatever written above is in the light of income Tax only.

As per VAT laws, if there is a contract for sales/supple or any work which attracts labour work also, it is works contract. The main condition here is leavy of Sales tax/ vat on transfer of propery in execution of a contract. Other wise it will fall under Commercial and industrial construction services or other services.

The principal employer is required to deduct 1 %/ 2% VAT tds from the invoices of Contractor. Here sub-contractor is not covered.

Rest income tax provisions are covered above.

2 Like

A.J. Rajasekhar (Executive - Finance) (132 Points)
Replied 05 January 2012

Dear Friends,

Total Invoice Value + Service Tax 10%+Educational Cess2%+Sec.Higher Edu.Cess= Gross Bill Amount

We Will Submit the Same to our Client.

After Sumbmission of Bill, They Will Deduct TDS2%, WCT 2% and they will paid the same to us.

Doubts:

1. if Material involvement also in Civil/Erection Work How to caliculate Service Tax, Whether i will take Service tax on 100% or 67% of the Bill Amount

2. How to Caliculate WCT 2% By the Client. I mean he will deduct 2% of WCT on 100% bill or some thing else.

Please Solve My Doubts.