Wct & tds on works contract
Querist : Anonymous
A company has given a contract for construction of server rooms to a proprietor. Invoice of proprietor does not seggregate contract value in material labour etc. It does not charge service tax VAT separately but mentions that price is inclusive of tax. Contract value id 80L.
Please advise me regarding:
1. Is company liable to charge service tax under reverse charge mechenism
2. is company liable to deduct WCT. if yes, what is rate and on what value?
ple help on priority.
2 Yes in Maharashtra you liable to deduct WCT 2% if he is registerted
Querist : Anonymous
Also, company's regd office is in Delhi but site where this construction work is happening is in UP. Please suggest which state VAT law will be followed?
I will answer the easiest one first - since there is no break up of materials, labour etc. the amount paid to the contractor is the consideration subject to TDS However, the Service Tax and VAT component can be deducted in determining the amount on which TDS has to be deducted.
VAT is a state subject and since you are a registered dealer in Delhi, assuming that your billing address is your registered office, WCT is deductible as per Delhi VAT Act. Being a state subject, the rates of tax, abatement, WCT, etc. vary from state to state. But if the invoices are raised on the UP address, the provisions of UP VAT Act would be applicable and your unit should have been registered under UP VAT Act. Being a state subject and depending on the facts and circumstances of the case your CA is the best person to advise you in this regard. Depending on the state the abatement varies, but the thumb rule normally followed in almost all states for VAT is 2/3rd material subject to VAT and 1/3 labour available as abatement, i.e in your case roughly Rs.54 lakhs more or less would be subject to VAT / WCT.
Service Tax on Works Contract Service is leviable under two categories depending on whether the contract is for 'Original Works' or 'Other than Original Works'. On Original Works the abatement is 60% and 40% is subject to Service Tax. On Other than Original Works the abatement is 30% and 70% is subject to Service Tax. As per the provisions of Notification No:30/2012 dated 20th June 2012, Works Contract Services are subject to Partial Reverse Charge of 50%. In simple words, it means the service recipient is liable to pay service tax on 50% of the taxable service i.e. 20% or 35% of the contract amount depending on whether the contract is for 'Original Works' or 'Other than Original Works'. So depending on the nature of works contract you are liable to pay service tax on Rs.16 lakhs or Rs.28 lakhs.
Querist : Anonymous
Thanks a lot for the detailed understanding given. I am obliged.
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