Works Contract
This query is : Resolved
01 October 2008
Mr. A is mfg some goods in maharashtra and installation is done in Kerala state. The activity is such that specific goods are made as per purcahse orders in maharashtra and then transferred to the kerala state as CST sale(Taxed @12.5%). Instalation is done in the other state and charged seperately.
However customers in kerala states deduct WCT TDS and the dealer cannot claim that because he does not have registration in kerala.
Whether paying tax in maharashtra is correct as per above facts?
The party is executing contracts in various state following same practice as expalined abpve and every state is deducting WCT TDS which is a loss for the party.
Please guide on the same issue.
However customers in kerala states deduct WCT TDS and the dealer cannot claim that because he does not have registration in kerala.
Whether paying tax in maharashtra is correct as per above facts?
The party is executing contracts in various state following same practice as expalined abpve and every state is deducting WCT TDS which is a loss for the party.
Please guide on the same issue.
01 October 2008
Dear Sir,
as per my understanding that, the goods manufactured in maharashtra, wherein it is transferred to kerala for installation work and customer in kerala deduct tds [works contract tds and not tds under income tax].
In my view this could be an interstate works contract as the goods are moving for the purpose of installtion at kerala.
The customers would be deducting tds [wct tds] based on the local vat laws.
when transaction fall under cst the local laws cannot be applied excpet for the purpose of claiming deductions and arriving taxable turnover. however in your case the goods are moving from maharashtra application of kerala local vat laws does not arises for reason that under cst the concept of deducting tds is not there.
Recently in the case of Rock International Vs State of Assam and Others [2008] 11 VST 111, the Hon'ble Gauhati High Court held that, state cannot levy tax on the interstate transactions is beyong the state legislature taxing.
Let me know the facts what i have understood is correct or not?
as per my understanding that, the goods manufactured in maharashtra, wherein it is transferred to kerala for installation work and customer in kerala deduct tds [works contract tds and not tds under income tax].
In my view this could be an interstate works contract as the goods are moving for the purpose of installtion at kerala.
The customers would be deducting tds [wct tds] based on the local vat laws.
when transaction fall under cst the local laws cannot be applied excpet for the purpose of claiming deductions and arriving taxable turnover. however in your case the goods are moving from maharashtra application of kerala local vat laws does not arises for reason that under cst the concept of deducting tds is not there.
Recently in the case of Rock International Vs State of Assam and Others [2008] 11 VST 111, the Hon'ble Gauhati High Court held that, state cannot levy tax on the interstate transactions is beyong the state legislature taxing.
Let me know the facts what i have understood is correct or not?
02 October 2008
thank you sir....what you have understood is correct.
Pls. clarify one issue
There are 2 possibilities in the case
1) Contractor will charge CST and pay tax in maharashtra OR
2) Kerala state will tax as local sales as the contract is completed there...
whether 2nd possibility is correct?
As per your opinion if i am following first posibility then WCT TDS should not be deducted...
The other issue is that if we follow CST option then also customer deduct TDS as we are unregistered dealers in theie states. Is there any specific provision which excludes interstate works contract from apllicability of TDS?
Pls. clarify one issue
There are 2 possibilities in the case
1) Contractor will charge CST and pay tax in maharashtra OR
2) Kerala state will tax as local sales as the contract is completed there...
whether 2nd possibility is correct?
As per your opinion if i am following first posibility then WCT TDS should not be deducted...
The other issue is that if we follow CST option then also customer deduct TDS as we are unregistered dealers in theie states. Is there any specific provision which excludes interstate works contract from apllicability of TDS?
02 October 2008
for levy of tax under cst, it is immaterial where the contract gets completed or where the final property gets transferred, as per section 3(a) the expression occasions the movement of goods from one place to another, i.e., in pursuance of the contract goods are moving otherwise there was no necessity to move the goods, therefore section 3(a) should prevail over section 4 of the cst act.
Section 4 of the cst act deals with when a sale is staid to take place outisde a state [i.e., local sale]. This section is subject to provision of section 3, therefore state cannot levy tax on the consideration that, the contract completed in kerala state or on ther other consideration that, goods finally gets transferred in kearala state.
If you are registered in Maharashtra and executing works contract by transfering material from maharashtra taking registration in kerala is not required. However if there is any chance of purchasing material in maharashtra for the purpose of exeucting this contract then only the question of taking registration in kerala arises.
With respect to specific provision which excludes works contract from applicability of tds:
Its a constitutional validity that, if state collects or charges tax on interstate works contract. therefore the expression provision is not required. Moreover under cst there is no specific provision for deduction of tax at source. Its only under local vat laws.
Section 4 of the cst act deals with when a sale is staid to take place outisde a state [i.e., local sale]. This section is subject to provision of section 3, therefore state cannot levy tax on the consideration that, the contract completed in kerala state or on ther other consideration that, goods finally gets transferred in kearala state.
If you are registered in Maharashtra and executing works contract by transfering material from maharashtra taking registration in kerala is not required. However if there is any chance of purchasing material in maharashtra for the purpose of exeucting this contract then only the question of taking registration in kerala arises.
With respect to specific provision which excludes works contract from applicability of tds:
Its a constitutional validity that, if state collects or charges tax on interstate works contract. therefore the expression provision is not required. Moreover under cst there is no specific provision for deduction of tax at source. Its only under local vat laws.
02 October 2008
Thank you very much sir....hope this will work...have to convience the parties for not deducting WCT TDS.
02 October 2008
Sirs,
I will take the oppotunity to add some thing to this conversation.
It is a settled law that no state is empowered to make any provision of deducting TAXES on Inter State transactions. Some caselaws:-
Larsen & Toubro Ltd. Vs. Commissioner of Sales Tax, Gujarat and others
Jaihind Projects Limited Vs. State of Madhya Pradesh and others
Jaiprakash Associates Ltd. Vs. State of M.P. and others
However, in this case I would like to know, while sending goods from Maharashtra to Kerala, who is obtaining Road permit/Way Bill for importing goods to Kerala. Whether the goods are directly despatched to the place of purchaser?
Larsen & Toubro Ltd. and another Vs. State of A.P. and others
I will take the oppotunity to add some thing to this conversation.
It is a settled law that no state is empowered to make any provision of deducting TAXES on Inter State transactions. Some caselaws:-
Larsen & Toubro Ltd. Vs. Commissioner of Sales Tax, Gujarat and others
Jaihind Projects Limited Vs. State of Madhya Pradesh and others
Jaiprakash Associates Ltd. Vs. State of M.P. and others
However, in this case I would like to know, while sending goods from Maharashtra to Kerala, who is obtaining Road permit/Way Bill for importing goods to Kerala. Whether the goods are directly despatched to the place of purchaser?
Larsen & Toubro Ltd. and another Vs. State of A.P. and others
03 October 2008
The goods are directly despatched to the place of purchaser where the installation is requird to be done. All ararngements for despatch are done by contractor in maharashtra.......
06 October 2008
In that case the sipply of goods from other states will be taxed as inter state sales.
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