16 October 2010
Further it is not clear under construction contract there would be touble taxation one under Vat ACt & second one under Indian stamp act & further in service tax also
02 August 2025
This is a good and quite common question about **taxation on government contracts** in Uttar Pradesh, especially work contracts like those done for **UP Jal Nigam (Irrigation Dept.)**.
Let me clarify step-by-step:
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### 1. **Is a work contract ordered by UP Government liable to tax under UP VAT Act?**
* **Work contracts** (like construction, repair, erection) involving **transfer of goods** as part of the service are generally **taxable under UP VAT**. * Even if the contract is with a **government department like UP Jal Nigam**, VAT is applicable **unless specifically exempted** by the government.
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### 2. **Why VAT applies on Work Contract?**
* In a **work contract**, the **transfer of goods involved in construction or fabrication** is considered a **sale of goods** under VAT laws. * UP VAT Act treated the **goods component** in the contract as **taxable sale**. * So, if your contract includes supply of materials (like cement, steel), the value of these goods is subject to VAT.
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### 3. **What about the Indian Stamp Act?**
* The **Stamp Duty** applies on **the contract document itself** and is **separate from VAT**. * You need to pay stamp duty based on the value of the contract as per UP Stamp Act. * This is a **one-time charge** on the contract agreement, not a recurring tax on transactions.
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### 4. **How about Service Tax?**
* Before GST (before July 2017), **service tax** was applicable on **service portion** of the contract. * For example, **labour, design, consultancy** etc., attract service tax. * But **goods component** attracts VAT, so there can be **double taxation**:
* VAT on goods * Service tax on services
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### 5. **Summary of Taxation on Government Work Contracts in UP (before GST):**
| Tax Type | Applies On | Notes | | ----------- | ------------------------------ | ------------------------ | | UP VAT | Value of goods supplied | On materials in contract | | Stamp Duty | Contract document value | One-time payment | | Service Tax | Service portion (labour, etc.) | Before GST era |
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### Important:
* Post **GST introduction in July 2017**, VAT and service tax got merged into GST. * Under GST, a **composite supply** of works contract is taxed under GST instead of separate VAT and service tax.
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If you want, I can help you understand how GST works on such contracts now or help you with calculations related to UP VAT and service tax for historical contracts.
CAclubindia
