20 July 2025
The Work Contract Tax (WCT) in Maharashtra, under the Maharashtra Value Added Tax (MVAT) Act, applies to the transfer of property in goods involved in the execution of a works contract. The tax rate varies based on the nature of the contract and the method of taxation chosen by the contractor. L NJ Bhilwara Apps +2 BCAS +2 MahaGST +2
1. Standard Tax Rates: Under the MVAT Act, the tax rates applicable to works contracts are as follows:
Civil Works (e.g., construction of buildings, roads, bridges): 30% of the total contract value. Installation of Plant and Machinery: 15% of the total contract value. Installation of Air-Conditioners and Air-Coolers: 10% of the total contract value. Fixing of Marble Slabs, Polished Granite Stones, and Tiles: 25% of the total contract value. Annual Maintenance Contracts: 40% of the total contract value. Any Other Works Contract: 25% of the total contract value. MahaGST These percentages represent the portion of the contract value considered as the sale price of goods, upon which VAT is levied. BCAS +4 CAclubindia +4 MahaGST +4
2. Composition Scheme: Maharashtra offers a composition scheme for works contracts, allowing contractors to pay a lump-sum tax instead of calculating VAT on the sale price of goods. The rates under this scheme are:
Construction Contracts: 5% of the total contract value. Other Works Contracts: 8% of the total contract value. MahaGST Under the composition scheme, contractors are not required to maintain detailed records of goods and services supplied. However, they cannot claim input tax credit on purchases. L NJ Bhilwara Apps +2 CAclubindia +2 MahaGST +2
3. Tax Deducted at Source (TDS): Employers (contractees) are required to deduct tax at source from payments made to contractors under works contracts:
Registered Contractors: 2% of the amount payable. Unregistered Contractors: 4% of the amount payable. CAclubindia L NJ Bhilwara Apps This deduction is made under Rule 40 of the MVAT Rules and is applicable to the amount payable to the contractor. TaxGuru
4. GST Considerations: With the implementation of the Goods and Services Tax (GST), works contracts are now subject to GST. The applicable GST rates are:
Construction Services: 18% (9% CGST + 9% SGST) or 18% IGST for inter-state supplies. Works Contracts Involving Transfer of Property in Goods: 18% GST, with the option to avail input tax credit. It's important to note that under GST, the concept of VAT on works contracts has been subsumed, and the tax structure has been simplified.
5. Implications for Contractors: Contractors should evaluate the most beneficial tax scheme based on their business operations:
Standard Taxation: Suitable for contractors who can maintain detailed records and wish to claim input tax credit. Composition Scheme: Beneficial for small contractors with limited turnover, as it simplifies compliance but forfeits the benefit of input tax credit.
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