vat rate under WCT Act

This query is : Resolved

Shekhar (Querist)
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05 May 2009 One of my client is registered under WCT Act. He is a contractor and using material purchased by himself and charging the same against the bill raised bi him to his client. At the time of billing he is charging VAT @ 12.5%(against both 4% and 12.5% purchase) Is it correct procedure. Also what rate of labour charges should be count on the bill raised by him to his clients.

CA Nitin Wadhwani

CA Nitin Wadhwani (Expert)
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06 May 2009 There are three methods for accounting for works contract:
1.Actual basis - VAT is to be charged on material and service tax on labour charges on actual consumption basis + appropriate apportionment of profit between the two.

2.On adhoc basis.
VAT - On 70% of contract amount
Service Tax- On 30% of contract amount

3.Composition Scheme

VAT-@5% of contract price.
Service tax @ 4.12 of contract price.

raghunandan

raghunandan (Expert)
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06 May 2009 Shekar,
U have not mentioned the place of registration.
However, there is nothing like registration under WCT Act. The WCT forms part of VAT. Since your client is charging 12.50% then I suppose he is registered under VAT (not under COT).
At the time of billing, he has to separate the material cost and labour cost. and on the material cost, he can charge VAT. The labour part may be excluded from the VAT.

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